Analysts’ Views:
PL Macro: The current account deficit in August (EUR 986 mn) was larger than expected but the FX market response was limited. Today, however, any downward surprise to our inflation rate forecast of -0.4% y/y in September may move the market. Disappointing data may strengthen expectations for a bigger move from the central bank. After a series of more hawkish comments earlier this week, Osiatynski, one of the " doves" in the MPC, suggested that there is space for further rate cuts and, in his opinion, it should be one move. Bratkowski shares the view that the policy rate should be lower. Such a statement is in opposition to what Chojna-Duch believes i.e. that now the MPC should wait and assess the effects of the recent cut. While fundamentally there is space for another 50 bp cut, the MPC may be reluctant to deliver it unless data, including today's inflation rate, and the new inflation projection are well below expectations. Currently, we bet on a 25 bp cut in November with risks on the downside. This situation may translate into a further drop in long-term yields, posting a risk to our current forecast of 10Y yields close to 3% at the end of the year.
RO Bonds: The MinFin intends to tap international markets before the of this year with a view to pre-financing 2015 needs. The Deputy Treasury Director said the MinFin is looking for a maturity longer than 10 years and wants to make the most out of a low-interest rate environment, bearing in mind the big redemptions in 1Q15. The move could also be seen as a precaution in case the conflict between Ukraine and Russia takes a turn for the worse and some investors might chose to move their capital from the Eastern border of NATO towards western countries. For the time being we see local yields rising towards the end of this year, as presidential elections approach and the geopolitical risks are still there.
HU Macro: According to the final data, industrial production decreased in August by 5.7% m/m, and y/y output growth declined to 0.5%. The final figure was published by the CSO yesterday and included the details behind the drop. On one hand, it is due to a one-off effect because the Audi engine factory stopped production for 2-3 weeks and Suzuki has been operating at reduced capacity for some time. On the other hand, total new orders in the observed branches of manufacturing declined by 0.4% in August and the volume of new domestic orders fell by 4.7%. This may suggest a more permanent downturn in the business cycle. Despite these poor figures the volume of total stock of orders increased by 18.2% y/y, and, in July, industrial production was at a historic high. We tend to believe that the decline is not just a one-off effect and have modified our 2014 industrial production forecast from 10.8% to 8.9%. Our market forecasts remain unchanged.
Traders’ Comments
CEE Fixed Income: If bond markets needed any excuses to head higher in price yesterday, they got it when the German ZEW was published. The Bund yield touched a record-low of 0.835% and POLGBs took that as a lead, outperforming in the CEE region in spite of a weaker PLN. The yield on 10y GGBs, however, broke through the 7% barrier to the upside as a reminder that tensions in the Eurozone could easily flare up again especially as German policymakers continues to show intransigence on the question of austerity even though they have been forced to revise their own growth projections down quite radically. Most other areas of CEE fixed income were basically treading water. German CPI is due out this morning and will be in focus.
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.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.