More GDP data and two central banks’ meetings

This week, Hungary, Slovakia and Romania will publish the GDP structure for 4Q23. The Polish and Serbian central banks will hold rate-setting meetings and we expect no change in the policy rate. In Poland, new growth and inflation projections will be published that may bring some insight into whether monetary easing is a possible scenario later this year. Apart from that, data on retail and industry sector performance at the beginning of the year will be published in several CEE countries. Hungary will release February’s inflation footprint on Friday. Finally, producer prices in January will be released in Romania and Serbia, January’s unemployment rate in Romania and wage growth in Czechia.

FX market developments

The Hungarian forint clearly underperformed last week, as it weakened against the euro quite visibly. First, the Hungarian central bank delivered a 100bp cut at the last meeting, as January’s inflation dropped visibly. Second, the conflict between the government and the central bank over the government’s plan to amend the central bank law could add to the depreciation pressure. The Czech koruna and the Polish zloty remained relatively stable. In Czechia, currency development may prove to be the key factor for the pace of monetary easing in the coming months, as central banker Holub said that the weak Czech koruna is a pro-inflationary factor. This week, there are two central bank meetings scheduled: in Poland and Serbia. We do not expect any change in the key policy rate. In Poland, it will be more interesting to see the growth and inflation projections in the context of possible space for monetary easing in the second half of the year.

Bond market developments

Government bond yields edged up slightly last week in CEE, with the Czech and Hungarian 10Y increasing the most, about 10bp w/w. Given the recent depreciation of both the CZK and HUF, the markets are keeping a close eye on the comments of central bankers to see whether weaker currencies could not be mentioned as a hurdle for the continuation of monetary easing at the current pace. Two Czech MPC members have already mentioned the recent weakening of the CZK as a pro-inflationary risk factor. The Slovak debt agency borrowed EUR 3bn via a 10Y syndicated bond issue last week, the largest in history. YTD issuance totaled EUR 6.5bn as of the end of February. In Croatia, the MinFin continues to focus on issuance of retail bonds and the Eurobond is likely to appear by April. Poland’s MinFin announced that they have completed 45% of their planned issuance. This week, Czechia will reopen CZECHGBs 2032, 2034 and 2040, and Serbia will issue a bond maturing in 2031. On top of that, Czechia and Hungary announced auctions of T-bills.

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