Erste Bank Research Team
Erste Bank
Yields heading south – Neither the FED’s tapering nor worries about geopolitical risks or solvency issues in Greece or Ukraine have stopped CEE bonds from extending their gains. Since the beginning of the year, CEE bonds measured by Erste’s CEE Eurobond Index and CEE Local Currency Bond Index have soared 8.7 and 8.9, respectively (in EUR terms). Romanian LCY bonds were among the best performers in the segment of 5Y bonds (14.0). If the ECB uveils an ambitious asset purchase plan next week, potential for yield compression still exists (i.e. in Poland). On the other hand, if the announcement falls short of expectations, we could see some correction in yields, especially of non-IG countries (Hungary).
Analysts’ Views:
TR Rating: Ahead of its rating review for Turkey on December 5, Moody's Senior Analyst for Turkey Alpona Banerji claimed that the country's vulnerability may deepen next year, due to the FED's rate hikes. Moody's expects Turkey to grow 2.8% next year and believes that the ECB's expansionary policies will be less influential on EMs like Turkey. Moody's rates Turkey at Baa3 with a negative outlook and we expect this to remain unchanged in the next year.
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.
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