CEE Macroeconomic and Fixed Income Research

Chart of the Day:

Raiffeisen Bank International Subordinated Debt: Finally, some respite for RBI. The price of sub debt was in freefall as speculation rose that coupon payments would be blocked by regulators. Yesterday’s ad hoc statement gave investors some hope that would not be the case. The board also announced that a divestment programme would supplant any need to raise additional capital.

Analysts’ View:

HR Macro: December industrial production brought a positive surprise, with robust 5.3% y/y growth above both our and market expectations (2.5% and 3%, respectively). While the monthly data revealed a marginal decline of 0.2% (s.a.), strong production in the intermediate goods sector pushed the headline figure into the black y/y. The December output data also displayed the strongest YTD performance in 2014, which concluded a cumulative 2014 industrial rebound of 1.3% y/y. As for the prospective 2015 performance potential, we see a low base effect and external impulses supporting production , balancing out weak domestic demand which is clearly putting downside pressure on the recovery profile. As for our capital market forecasts, we expect them to remain unaffected by this release.

Traders’ Comments:

CEE Fixed income: A meeting between Greek Prime Minister, Alexis Tsipras, and EU Parliament President, Martin Schulz, was conciliatory rather than antagonizing and markets preferred to focus on the positives amid very mixed signals from the Greek government. The jury is out about how things on the debt restructuring front will develop in Greece but in our region debt restructuring is already very real in Ukraine and Belarus. In spite of this, CEE fixed income had a calm day with a bit more two-way flow and both the HUF and PLN gained as tensions eased a little. For the moment, price movements in secondary bond markets can broadly be summed up as directionless but primary markets are still heading in one direction only. Erste Group Bank priced EUR 500 m in 10Y covered bonds at MS +6 bps, down from IPT of +10 bps.