News
CZ: Neutral – The Govt’s 2012 debt financing strategy assumes borrowing needs of CZK 243bn gross and CZK 107bn net / CNB vice governor Vladimir Tomsik said the weakening CZK is doing policy maker’s job (p2)
KZ: Positive – Nov IndOut holds up well at 2.9%YoY (p2)
LV: Positive – 3Q final GDP revised up to +6.6% yoy (p2)
RO: Positive – Nov CPI falls to 3.44% yoy / The trade deficit shrank 0.8% yoy in 10M11 / MinFin sold RON 1.4bn in 11M T-Bills vs. RON 1.2bn planned, avg. yield at 6.6% (p2)
TK: Positive – 3Q GDP growth comes in at 8.2% yoy (p3)
Today’s Events
BG: Nov CPI / CZ: Oct C/A / HU: HUF 30bn 3M T-Bill auction, Nov CPI / LT: Oct C/A / LV: Oct C/A / PL: Nov CPI. Oct C/A / RO: Oct C/A / SK: Nov CPI / UA: USD-linked 3Y, 5Y and 10Y GB, UAH 3Y GB, 6M and 12M T-Bill auction
EEMEA Markets
Global backdrop: risk is again firmly off with year end liquidity shortage and ongoing market uncertainty regarding the solution in Europe hitting markets badly. European equity markets were down more than 2% and Asian O/N is also 1-2% lower. Meanwhile EUR/USD is now below 1.32 and trading very close to recent lows. This backdrop has obviously supported core bond markets with long end Bund yields falling more than 10bp whilst Eurozone periphery bond yields widening sharply. 10y Italy is now almost 80bp wider since last Wednesday and is about 15bp wider this morning. Today in the Eurozone focus will be on speeches by Van Rompuy and Barosso in the EU parliament and on the ZEW index whilst in the US FOMC decision will be in the limelight. This backdrop is obviously not supportive of CEEMEA markets as FX weakened more than 1% whilst credit and local currency bond yields widened significantly albeit with very low turnover.
Russia in focus: following the weekend protests Russian credit markets significantly underperformed yesterday. The liquidity squeeze continued in the local money market with the FinMin now expanding collateral rules in order to make funding available for more market participants. Meanwhile we note that despite all the effort of the CBR and MinFin to support banking sector liquidity the aggregated excess liquidity in the system (the sum of deposits at the CBR and the corresponding accounts) is broadly unchanged since September (hovering around RUB800bn, see chart) suggesting that the liquidity provided might be leaving the RUB market. One of our top CEEMEA trade ideas for 2012 (see details in our CEE Quarterly: Testing times) was to buy Russia 5y CDS versus selling 5y Turkey CDS as a potentially very attractive hedge. The spread is now around plus 8bp (from about 30bp last week) and we continue to see scope for a much bigger underperformance from the Russian leg of the trade (we target around negative 150bp on the trade).
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http://www.easyforexnews.net/wp-content/uploads/2011/12/EEMEA-daily131211_MS.pdf
Gyula Toth
UniCredit Research