Erste Bank Research Team
Erste Bank
Analysts’ view:
PL Rates: According to Zielinska-Glebocka, the chances for a rate cut have recently increased. The rising uncertainty is most visible in the dropping PMI index and its value below 50 worries Zielinska-Glebocka. She does not rule out a 25-50bp cut. On the other hand, Kazimierczak is convinced that the MPC should sustain a higher level of rates to prevent the zloty from depreciating. Although the data supports the easing, the MPC may not be convinced that such a move is necessary in September. There are more members who have become dovish in their latest comments. Rate cut expectations support a low level of yields (10Y close to 3.4% at the end of 3Q14).
RO Bonds: The MinFin sold bonds maturing in Jun-21 worth RON 300mn as planned, at an average yield of 4.14%. Demand was robust and investors put in bids worth RON 808mn. Debt managers have covered 2/3 of this year’s gross funding needs so far, which suggests that they are not in a position to cut issuance aggressively or reject investors’ bids in the remainder of 2014. Our forecast of higher bond yields by year-end is intact, with 5Y yields likely rising towards 4.1% in December. FED tapering, moderate political noise ahead of the presidential election scheduled for November and a possible freeze of the agreement with the IMF are the key reasons behind our view.
This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.
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