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Erste Group: CEE Macro/Fixed Income Daily

09 июня 2011 | Erste Group: CEE Macro/Fixed Income Daily

Analysts’ views:

PL Rates: As expected, the NBP raised rates by 25 bps. The accompanying press conference had a dovish tone to it, implying rates will be on hold from here on. This is in line with our forecast for key rates but 3m WIBOR still has ample room to rise from current levels, in our view.

HU Rates: Yesterday, the minutes of the latest rate-setting meeting confirmed that all seven rate-setters voted unanimously to keep the policy rate unchanged at 6%. The central bankers agreed that, with an unchanged policy rate, the inflation figure could decrease close to the 3% target towards the end of 2012. By implication, the base rate may be decreased. However, we currently stick to our forecast of an unchanged base rate for this year.

RO Macro: The structure of 1Q11 economic growth again revealed the poor state of household consumption (-0.5% q/q) after the implementation of a tough fiscal consolidation program last summer. Real GDP was revised slightly upwards to +0.7% q/q (seasonally-adjusted data) and +1.7% y/y, supported by net exports and the change in inventories. Government consumption was particularly weak (-6.2% q/q), in line with a decrease in the number of public employees. We maintain our scenario regarding economic growth of around 2% in 2011. The NBR is likely to keep the key rate on hold at 6.25% in 2011 and start a tightening cycle only in 1Q12.

TR Macro: The CBT announced the first inflation expectation survey of the month, according to which, year-end expectations were revised up to 7.54%, from 6.99% in a previous survey. The CBT will probably dismiss the deterioration in expectations as they tend to follow recent developments in inflation rather than lead them. The next monetary policy meeting of the CBT will take place on June 23. We expect no change in either the policy rate or RRRs.

Traders’ comments:

CEE: Polish bond yields rose slightly ahead of the decision to hike key rates by 25 bps but rallied down following the NBP press conference. The yield curve flattened and we saw strong demand for the 5y segment of the bond curve. With ASW levels at -30 bps in 3y, +5 bps in the 5y & + 50 in the 10y, buying interest may begin to shift to longer maturites from here on. Hungarian bonds didn’t react to the comments from Moodys about a possible downgrade but didn’t really get any impetus from the CB minutes either. Overall, however, flow is decent and buying interest dominates. Slovak bonds rallied nicely yesterday in spite of the sudden reversion back to pressure on Greek CDS. The ECB decision will impact appetite for Slovak bonds but with the consensus expecting no change today, spreads to German benchmark bonds look compelling. The SLOVGB 5.3 2019 prices at a spread 120 bps above DBR 3.5 2019. One market under pressure at the moment is Romania. The RON is weakening as EURRON continues to strengthen and has broken upwards out of the unofficial target range of 4 to 4.15. The ROMANI 5 2015 Eurobond is selling off following the announcement that the new Eurobond will likely have a 5y maturity. This looks like positioning ahead of Thursdays expected issuance and could turn out to be a decent entry point given that, fundamentally, the macro data is not surprising and the CDS is comparably stable. In cash credit, we saw decent demand for CEE credit, especially CEZCO, PKO and SID Banka. We see relative vlaue today in City of Warsaw.

For more details go to our Comments section.