Key upcoming events and data releases
CountryTimeIndicatorPeriodForecastRange Last20 Jan
PL14:00Core Inflation, % yoyDec3.02.8/3.1/3.23.0
HU14:00Monetary Council meetingJan7.57.5/7.5/7.07.0TR13:00Benchmark Repo RateJan5.755.75/5.75/5.755.75RU08:00Industrial output, % yoyDec4.50 2.7/3.5/4.23.90
HU09:00Retail trade, % yoyNov-0.20-0.6/-0.2/0.40.6TR13:30Capacity utilisation, %Jann.a.n.a.75.5RU08:00Retail sales, % yoyDec9.00 5.0/8.4/9.08.6RU08:00Capital investment, % yoyDec7.00 4.0/7.5/10.07.7
HR11:00Industrial output, % yoyDec0.5n.a.-0.3PL10:00Retail trade, % yoyDec11.06.5/9.9/12.812.6
– December data showed a decline to 4.6% yoy (our call was for4.6% yoy vs. consensus of 4.7% in the range of 4.5% to 4.9% yoy) from4.8% in November. Fading inflationary dynamics were largely driven by sta-tistical base effects and a somewhat lower increase in food prices. On thedata front, core inflation is due out today (we expect a stabilisation at 3% yoy, after an increase for several months). The current stabilisation of inflation-ary dynamics should open up the door to loosen monetary policy – if EUR/PLN levels allow. Moreover, the local sovereign bond market may enjoy somesupport as supply-side risks will decrease going forward, due to the currentaggressive bond placements without much damage to the yields.
– In line with consensus, we forecast an interest rate hike of 50 ba-sis points next Tuesday which will bring the base rate to 7.5%. This – andeven more – is fully priced into market yields. FRAs actually indicate thatmany market participants anticipate at least 100 basis points. Nevertheless,we see a strong probability that the tightening cycle will end next week. Thefollowing meeting is at the very end of February and by that time an agree-ment between Hungary and the international parties will probably be in thepipeline. This would lower the Hungarian risk premium and calm market vol-atility, which currently are the main causes of rate hikes.
– The effect of S&P’s rating downgrades in the Eurozone onthe Czech currency proved to be short-lived. CZK is likely to reach our Marchtarget unless some unexpected events occur in the Eurozone or Hungary. Inour baseline scenario, we expect the CNB to cut its repo rate by 25bp to0.5% in Q1 2012, due to absence of demand-driven pressures to inflationand the expected recession in the Czech economy. The way we see it, thisstep by the CNB will most likely come in March.
PLN18.104.22.168.11m-rate5.15.04.94.55y bond22.214.171.124.310y bond
HUF126.96.36.199.11m-rate188.8.131.52.65y bond9.08.68.07.810y bond
CZK0.60.50.50.51m-rate184.108.40.206.25y bond220.127.116.11.410y bond
RUB**18.104.22.168.51m-rate8.08.48.38.55y bond22.214.171.124.110y bond1.291.301.321.35
* Prices as of 20 January 2012 10:36 a.m. CET; Cur- rencies per 1 EUR, **RUB per 1 USD Source: Thomson Reuters. Raiffeisen RESEARCH
Neutral: PLN T-bonds, HUF T-bonds, RON T-bonds, CZK T-bonds, TRY T-bonds
Issue 3/2012 20 January 2012
Bond Markets Outlook