CEE Macroeconomic and Fixed Income Research

Analysts’ View:

CZ Bonds: Yesterday, the Czech MinFin raised in total CZK 7 bn in two reopened tenders of papers due 2018 and 2028. Even though the total amount sold corresponds to the lower limit of the range the MinFin had planned to offer (CZK 7-13 bn), the liquidity position of the Czech MinFin remains sufficiently high, enabling it to comfortably fulfill its commitment to take on no new debt in 2015. In the case of the 3Y tenor, yields came down to 0.01% from the 0.08% reached in February and the bid-to-cover jumped to 5.2 from 3.3). Given persistently strong investor demand supported by the ECB's QE, yields are expected to remain under downward pressure from a technical perspective in the coming months. Therefore, we continue to see the yield of the Czech 10Y T-bond capped around current levels of 0.39% at the end of 2Q15.

Traders’ Comments:

CEE Fixed income: CEE government bond yields drifted lower yesterday and FX markets were relatively calm given with the exception of the TRY which is probably being negatively impacted by the sudden rise in the oil price following Saudi Arabia’s decision to fly bombing missions in Yemen. Fixed income markets continue to be lackluster, in general, with a few opportunistic buyers for sub debt in financials from our region (RBIAV, VIGAV 43) but availability of product is scarce (bid without....offered without!). Wider markets continue to find little directional pull and, thus, conviction is light. It feels like we will drift like this into Easter should there be no meaningful news but with geopolitical developments in the Middle East driving equity prices lower and the potential of a Grexident still making headline news the catalyst could come swiftly and suddenly which is capping appetite to take risk at these historically low yield levels across almost all fixed income asset classes in our region.