Headlines
Currencies: IMF downgrades growth outlook for Czech Republic significantly
Fixed Income: CZK 10Y benchmark auction well bid
Czech Republic
The Czech koruna moved basically sideways yesterday, though in intra-day trading the EUR/CZK pair traded temporary above the 27.0 figure. The short-term harm for the koruna was caused by the fresh IMF outlook, which sees now Czech GDP to contract by 3.5% this year. In our view, this scenario is too pessimistic; we expect negative GDP growth around 1 or 2 % for this year.
Today, the domestic and regional calendar is empty so the koruna would rather watch core markets – especially the ongoing earnings season in the US.
On Wednesday the main issue on the Czech bond market was the auction of 5.00/2019 paper. The auction initiated solid demand. The basic offer was CZK 7 bln however as we had expected that demand was higher and reached over CZK 17 bln. Therefore at the end, the Finance Ministry sold bonds for CZK 9.28 bln with CZK 1.5 bln. the Ministry retained in its books. Average yield was 5,479%, i.e. lower than 5.619% in previous tranche of the same paper in mid March.
No important domestic news is expected for today. The bond market may by quiet again, influenced by regional sentiment. Nevertheless, the expected rate cut could pres short end of the yield curve lower.
| Currencies | Close | change |
| EUR/CZK | 26.95 | 0.4% |
| EUR/HUF | 296.9 | -0.5% |
| EUR/PLN | 4.397 | 0.0% |
| USD/PLN | 3.417 | 0.0% |
| EUR/USD | 1.304 | 0.7% |
| USD/JPY | 98.1 | -0.1% |
Poland
The Polish zloty weakened a bit yesterday, but the loss was almost negligible. Actually, there were two negative news items yesterday. The first was related to the public budged figure, revealed by Eurostat. They budget figures showed that the Polish budget gap reached 3.9 % of GDP (according to ESA95 rules), which raises fears that Poland won’t be able to meet the euro entry criteria. Secondly, the IMF downgraded Poland’s growth outlook for this year to a decline of 0.7%.
Today, the domestic calendar is empty, so the zloty will closely eye the ongoing earnings season and the reaction on global market sentiment. These figures are expected to support positive sentiment in emerging markets and in the Polish forex market too.
| Bonds 2Y | Close | change |
| Czech Rep. | 3.25 | -0.07 |
| Hungary 3Y | 11.00 | -0.13 |
| Poland | 5.55 | 0.02 |
| Slovakia | 2.54 | -0.08 |
| Eurozone | 1.46 | 0.02 |
| USA | 0.96 | 0.03 |
| Bonds 10Y | Close | change |
| Czech Rep. | 5.58 | -0.15 |
| Hungary | 10.89 | -0.28 |
| Poland | 6.18 | 0.02 |
| Slovakia | 5.20 | 0.21 |
| Eurozone | 3.20 | 0.03 |
| USA | 2.94 | 0.05 |
