Headlines
Currencies: CEE currencies weakened on rising tensions in Greece
Czech Republic
The koruna felt some negative spill over effect form rising Greek sovereign risk premium and it eased slightly yesterday. Nevertheless, the EUR/CZK pair failed to break above the psychological resistance standing at the 26.0 level. Nevertheless, it seems that the pair has been finally successful to bounce above this level. The domestic calendar remains empty till the beginning of the next week, so unless the market faces some unexpected comments form domestic central bankers, the koruna will rather watch other foreign markets, where news about Greece and the US eco fundamentals might play the central stage.
The Czech yield curve flattened in a bullish fashion yesterday, but trading was very light again. Interestingly, the asset-swap spreads between bond yields and swap rates have continued tightened despite rising risk premium on government bond in the Euro-zone periphery. The same is true for the Czech CDS. We think that such a positive developments might (at least temporary) reverse if Greece is downgraded for instance.
| Currencies | change | |
| EUR/CZK | 26.03 | 0.7% |
| EUR/HUF | 271.5 | 0.4% |
| EUR/PLN | 3.985 | -0.1% |
| USD/PLN | 2.923 | -1.3% |
| EUR/USD | 1.356 | 0.5% |
| USD/JPY | 89.4 | 0.0% |
| Bonds 2Y | change | |
| Czech Rep. | 1.42 | -0.01 |
| Hungary 3Y | 6.97 | -0.04 |
| Poland | 4.95 | -0.01 |
| Slovakia | 2.04 | 0.00 |
| Eurozone | 0.84 | -0.04 |
| USA | 0.84 | -0.01 |
| Bonds 10Y | change | |
| Czech Rep. | 4.15 | -0.08 |
| Hungary | 7.75 | -0.12 |
| Poland | 6.03 | -0.03 |
| Slovakia | 4.19 | 0.02 |
| Eurozone | 3.11 | 0.00 |
| USA | 3.64 | -0.02 |
Hungary
The Hungarian forint weakened a bit on Thursday afternoon on the back of a bitter tone on equity markets. The pair slid to 271.50 from 270.00 and settled in between at 270.80 this morning. It seems that market concerns about the sustainability of the recovery process are back and this could hurt emerging market currencies after their 11-months old rally since last March.
Statistical data showed further increase on the unemployment rate to 10.8% from 10.5% in January and double-digit fell of investments in the fourth quarter at -11% Y/Y. These are slightly worse than expectations, so risk of a slower recovery or a double-dip is also an issue here.
Hungarian fixed income bonds had a good day despite the currency’s volatility. Yields dropped 10bps at the longer-end and the 10-year benchmark fixing decreased to the key level of 7.50%, which was a strong resistance level in the previous months. Auction results showed decent interest for 3-, 5- and 10-year bonds with bid-cover ratios close to 3. Foreign investors could have been particularly active after the rally on core markets, but we think this rally could be short-lived and fundamental concerns could quickly reverse this after the April election.
