Headlines
Currencies: CEE currencies slightly lower in step with global sentiment
Fixed Income: Czech state easily sells EUR 2bn of Eurobond
Czech Republic
Czech koruna eased as it party tracked the weakening forint on Monday. The forex market just monitored a mixed bag of domestic macro data and completely shrugged of a successful issuance of the Czech government Eurobond.
Recall, that the Czech state easily sold EUR 2bn of the new 10Y Eurobond denominated in euro. The demand was huge – more than 5 billion euro. Nevertheless, the pricing was in line with market condition as it reached 105 bps above mid euro swaps. Yesterday’s sale means that the Czech MinFin effectively covered its financing needs and future domestic issuance could go into its reserves.
Yesterday’s successful sale suggests that today’s domestic auction of the 3Y government benchmark should go well too, although investors might be a little bit exhausted by the huge supply of the Czech state debt in recent days and prices might move lower after the auction.
| Currencies | change | |
| EUR/CZK | 24.76 | 0.4% |
| EUR/HUF | 287.0 | 1.4% |
| EUR/PLN | 3.952 | 0.8% |
| USD/PLN | 3.067 | 0.4% |
| EUR/USD | 1.276 | -1.2% |
| USD/JPY | 83.9 | -0.4% |
| Bonds 2Y | change | |
| Czech Rep. | 1.84 | 0.05 |
| Hungary 3Y | 7.28 | -0.02 |
| Poland | 4.75 | 0.01 |
| Slovakia | 1.74 | 0.11 |
| Eurozone | 0.61 | -0.01 |
| USA | 0.49 | -0.02 |
| Bonds 10Y | change | |
| Czech Rep. | 3.30 | -0.09 |
| Hungary | 7.42 | -0.10 |
| Poland | 5.63 | 0.04 |
| Slovakia | 3.78 | 0.16 |
| Eurozone | 2.27 | -0.06 |
| USA | 2.64 | -0.07 |
Hungary
The Hungarian forint started the week in a bad mood as the stronger dollar and weaker equity markets lowered the appetite for high-yielding currencies. The pair dropped 1% from 284 to 287.
There are a growing numbers of press reports about very tight 2011 budget, which could be the basis for a large-scale tax reduction. PM Orban said over the weekend that ‘thousands of billions has to be taken out from the economy’, but refrained using the word austerity. This could mean that the government may introduce a tight fiscal policy after the municipality election, which could be good news , but it is still 4-weeks away.
The Hungarian fixed income market lost about 10bps with the weaker currency. The market could remain hibernated in the coming days and investors could remain on the sideline until the outlook gets clearer.
Poland
The Polish zloty failed to break further below 3.92 EUR/PLN. The session was empty both on the domestic and global scene and the pair was trading in a tight range below 3.95. The news that car sales kept a solid 7.4% dynamics were more or less ignored.
Today the FX reserves release should not trigger any major reaction. The zloty might stay under moderate pressure after reports about additional capital needs of German banking sector. Hence we prefer a wait and see mode strategy for now.
