Quiet week ahead of the region

This week, producer price growth will be published in Czechia and Slovenia. In Croatia, final inflation in May will be released alongside the May unemployment rate and real wage growth in April. The unemployment rate is also due in Slovakia this week. Other than that, Slovakia and Serbia will publish current account data. All in all, it is going to be quite a calm week, with a public holiday on Thursday in Austria, Croatia and Poland.

FX market developments

In the first half of the week, the Polish zloty and Hungarian forint strengthened against the euro. In Poland, the government survived the confidence vote on Wednesday. Parliamentary elections are scheduled for autumn 2027. In Hungary, inflation rose to 4.4% y/y in May, briefly supporting the EURHUF move toward 400. The end of the week brought a change in the trend, however. In Serbia, the central bank kept the key policy rate unchanged at the last meeting at 5.75%. We expect monetary easing to begin in July, however. This week, there are no market-related events in the region.

Bond market developments

Yields on CEE government bond markets edged down slightly last week, with Hungary as an outlier. The Hungarian government bond curve moved higher, driven by expectations of increased issuance to cover the fiscal shortfall and a rebound in inflation, which raises the risk of further delays in monetary easing. Hungary has openly announced plans for an additional EUR 3bn in foreign issuance beyond the initial target. In contrast, Romania’s debt agency stated it would limit foreign issuance until there is greater clarity on the fiscal consolidation package - an essential factor for maintaining the country’s investment-grade rating. The head of the agency emphasized the urgency of adopting a decisive consolidation plan early, warning that failure to do so could result in the loss of access to certain investors restricted to investment-grade assets, or even trigger fire sales if the rating is downgraded. Fitch also underscored the importance of fiscal consolidation in a note released last week, two months ahead of its scheduled rating review. This week, Slovakia will reopen SLOVGBs 2031, 2033, 2035, and 2051, while Romania will reopen ROMGBs 2027, 2031, and 2034, targeting to raise RON 400mn from each paper, and Czechia will reopen CZGBs 2033, 2036, and 2044. Croatia, Czechia and Hungary plan to sell T-bills and Poland will offer a variety of bonds.

Download The Full CEE Insights