Central European Daily
Thursday, 04 November 2010
Central European Daily Written by CSOB Prague, CSOB Bratislava, Kredyt Bank Warsaw and K&H Budapest
Headlines Currencies: EUR/PLN tests the 3.90 support level as more MPC members talk hawkish Fixed Income: CNB will stay on hold, but the macro projection should be more optimistic
Czech Republic Currencies EUR/CZK EUR/HUF EUR/PLN USD/PLN
24.49 271.9 3.908 2.806
change -0.2% 0.1% -0.7% -0.2%
EUR/USD USD/JPY
1.415 81.1
0.8% 0.6%
Bonds 2Y Czech Rep. Hungary 3Y Poland Slovakia Eurozone USA
1.75 6.70 4.85 1.90 0.98 0.34
change -0.08 0.01 0.03 0.00 -0.02 -0.01
3.64 7.13 5.67 3.86 2.45 2.56
change 0.00 -0.01 -0.03 0.05 0.00 0.00
Bonds 10Y Czech Rep. Hungary Poland Slovakia Eurozone USA
Both the koruna and the Czech fixed income market were waiting not just for Fed decision but also for today’s CNB interest-rate setting meeting. While in recent months more and more CNB voices have been calling for an increase in interest rates and at the October meeting, one banker even voted in favor of a rate increase, it is once again unlikely that CNB will startle the market by raising its rates today. However, the new projection is expected to be somewhat more optimistic than the last one. The Bank Board will have access to a new somewhat more optimistic macro forecast, at least in terms of GDP growth. It is also likely that the new forecast will see a faster increase of inflation rate which means the level of inflation will start to move outside the target. The previous CNB forecast saw inflation holding below the targeted level of two percent until the end of 2011. Such a change in the future outlook could hasten the timing of the first rate increase from roughly mid 2011 to the beginning of 2011, which will likely coincide with the discussion of the next forecast in February. Concerning the market reaction to today’s press conference, we think that there might be a slight upward pressure in the short end of the curve, while the koruna might slip in a bullish mode (supported by zloty’s gains too).
KBC Bank N.V. - Treasury and Capital Markets Front Office, Market Research
Thursday, 04 November 2010
Central European Daily
Intraday graph of EUR/PLN. The Zloty appreciated further after the hawkish comments made by a central bank policy maker.
Hungary Forint unchanged despite bullish EM sentiment Despite the optimistic sentiment on emerging markets after the Fed announcement, the Hungarian forint failed to capitalize from this as investors stay cautious about Hungary after the recent government announcements. The pair slid yesterday about 1% from 270.50 to 273.00, where it found some support and settle touch above that. The currency move was especially interesting as the Polish unit strengthened, so it seems that there could be country-specific factors behind the weaker performance of the forint. The bond market also remained unchanged. There was a bit of a recovery in the long-term forward spreads of IRS, but interest for bonds remained muted.
Poland On Wednesday, the Polish zloty posted solid gains and reached 3.91 EUR/PLN on speculation that Polish Central Bank will increase reference rate soon. Monetary Policy Council (MPC) member Anna Zielenska-Glebocka said that MPC should (bearing in mind recent macroeconomic readings) consider rate hike. Hence, she supplemented fellow MPC member Jan Winiecki, who called for increase of interest rate on Tuesday. Considering that both mentioned MPC members voted to keep rates unchanged during August meeting (which ended 6:4 in favor of flat rates), we can foresee that hawks might be on move in Poland.
KBC Bank N.V. - Treasury and Capital Markets Front Office, Market Research
2
Thursday, 04 November 2010
Central European Daily
Tables of rates IBO R 3M Czech Rep. Hun gary Po land
1.21 5.35 3.85
chang e 0.00 0.00 0.00
Eu ro zon e USA
1.05 0.29
0.00 -0.02
IRS 2Y Czech Rep. Hun gary Po land
1.90 5.92 4.92
chang e 0.00 0.05 0.00
Eu ro zon e USA
1.60 0.50
-0.01 -0.02
FRA 3x6 Cz ech Rep . Hu ng ary Polan d
1.32 5.49 4.27
chang e 0.00 0.08 -0.01
Euroz one US A
1.21 0.36
0.00 -0.02
IRS 10Y Cz ech Rep . Hu ng ary Polan d
2.73 6.49 5.27
chang e 0.02 0.06 -0.04
Euroz one US A
2.75 0.36
0.01 -0.01
Cen tral Ban k Rate 0.75 Czech Rep . Hung ary 5.25 3.50 Poland Slovakia 1.00 1.00 Euro zon e USA 0.25 STO CKS PX BUX W IG Euro sto x DAX S&P
last chn g -25 -25 -25 -25 -25 -75
close 1168.3 23075.1 46417 2830.43 6617.8 1198
ch an ge 0.6% -0.3% -0.3% -1.1% -0.5% 0.4%
Calendar Date
Time Indicator
Forecast
Period
m/m
CZ
4.11.2010 12:30 CNB meeting (%)
11/2010
HU
5.11.2010
09/2010 *P
09:00 Industrial output (%)
Brussels Research (KBC)
0.75
y/y
Consensus m/m 0.75
y/y
Previous m/m
y/y
0.75 2.2
14.9
Global Sales Force
Piet Lammens
+32 2 417 59 41
Peter Wuyts
+32 2 417 32 35
Brussels
Didier Hanesse
+32 2 417 59 43
Corporate Desk
+32 2 417 45 82
Joke Mertens
+32 2 417 30 59
Commercial Desk
+32 2 417 53 23
Mathias Van der Jeugt
+32 2 417 51 94
Institutional Desk
+32 2 417 46 25
+353 1 6646892
London
+44 207 256 4848
Frankfurt
+49 69 756 19372
Dublin Research (KBC Bank Ireland) Austin Hughes Prague Research (CSOB) Jan Cermak
+420 2 6135 3578
Paris
+33 153 89 83 15
Jan Bures
+420 2 6135 3574
New York
+1 212 541 06 97
Singapore
+65 533 34 10
Bratislava Research (CSOB) Marek Gabris
+421 2 5966 8809
Warsaw Research (Kredytbank) Piotr Radzewicz
+48 22 6345 946
Budapest Research (K&H) Gyorgy Barcza
Prague
+420 2 6135 3535
Bratislava
+421 2 5966 8436
Budapest
+36 1 328 99 63
Warsaw
+48 22 634 5210
Moscow
+7 495 228 69 61
+36 1 328 99 89
Our reports are also available on: www.kbcdealingroom.com This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
KBC Bank N.V. - Treasury and Capital Markets Front Office, Market Research
3
Central European Daily Written by CSOB Prague, CSOB Bratislava, Kredyt Bank Warsaw and K&H Budapest
Headlines Currencies: EUR/PLN tests the 3.90 support level as more MPC members talk hawkish Fixed Income: CNB will stay on hold, but the macro projection should be more optimistic
Czech Republic Currencies EUR/CZK EUR/HUF EUR/PLN USD/PLN
24.49 271.9 3.908 2.806
change -0.2% 0.1% -0.7% -0.2%
EUR/USD USD/JPY
1.415 81.1
0.8% 0.6%
Bonds 2Y Czech Rep. Hungary 3Y Poland Slovakia Eurozone USA
1.75 6.70 4.85 1.90 0.98 0.34
change -0.08 0.01 0.03 0.00 -0.02 -0.01
3.64 7.13 5.67 3.86 2.45 2.56
change 0.00 -0.01 -0.03 0.05 0.00 0.00
Bonds 10Y Czech Rep. Hungary Poland Slovakia Eurozone USA
Both the koruna and the Czech fixed income market were waiting not just for Fed decision but also for today’s CNB interest-rate setting meeting. While in recent months more and more CNB voices have been calling for an increase in interest rates and at the October meeting, one banker even voted in favor of a rate increase, it is once again unlikely that CNB will startle the market by raising its rates today. However, the new projection is expected to be somewhat more optimistic than the last one. The Bank Board will have access to a new somewhat more optimistic macro forecast, at least in terms of GDP growth. It is also likely that the new forecast will see a faster increase of inflation rate which means the level of inflation will start to move outside the target. The previous CNB forecast saw inflation holding below the targeted level of two percent until the end of 2011. Such a change in the future outlook could hasten the timing of the first rate increase from roughly mid 2011 to the beginning of 2011, which will likely coincide with the discussion of the next forecast in February. Concerning the market reaction to today’s press conference, we think that there might be a slight upward pressure in the short end of the curve, while the koruna might slip in a bullish mode (supported by zloty’s gains too).
KBC Bank N.V. - Treasury and Capital Markets Front Office, Market Research
Thursday, 04 November 2010
Central European Daily
Intraday graph of EUR/PLN. The Zloty appreciated further after the hawkish comments made by a central bank policy maker.
Hungary Forint unchanged despite bullish EM sentiment Despite the optimistic sentiment on emerging markets after the Fed announcement, the Hungarian forint failed to capitalize from this as investors stay cautious about Hungary after the recent government announcements. The pair slid yesterday about 1% from 270.50 to 273.00, where it found some support and settle touch above that. The currency move was especially interesting as the Polish unit strengthened, so it seems that there could be country-specific factors behind the weaker performance of the forint. The bond market also remained unchanged. There was a bit of a recovery in the long-term forward spreads of IRS, but interest for bonds remained muted.
Poland On Wednesday, the Polish zloty posted solid gains and reached 3.91 EUR/PLN on speculation that Polish Central Bank will increase reference rate soon. Monetary Policy Council (MPC) member Anna Zielenska-Glebocka said that MPC should (bearing in mind recent macroeconomic readings) consider rate hike. Hence, she supplemented fellow MPC member Jan Winiecki, who called for increase of interest rate on Tuesday. Considering that both mentioned MPC members voted to keep rates unchanged during August meeting (which ended 6:4 in favor of flat rates), we can foresee that hawks might be on move in Poland.
KBC Bank N.V. - Treasury and Capital Markets Front Office, Market Research
2
Thursday, 04 November 2010
Central European Daily
Tables of rates IBO R 3M Czech Rep. Hun gary Po land
1.21 5.35 3.85
chang e 0.00 0.00 0.00
Eu ro zon e USA
1.05 0.29
0.00 -0.02
IRS 2Y Czech Rep. Hun gary Po land
1.90 5.92 4.92
chang e 0.00 0.05 0.00
Eu ro zon e USA
1.60 0.50
-0.01 -0.02
FRA 3x6 Cz ech Rep . Hu ng ary Polan d
1.32 5.49 4.27
chang e 0.00 0.08 -0.01
Euroz one US A
1.21 0.36
0.00 -0.02
IRS 10Y Cz ech Rep . Hu ng ary Polan d
2.73 6.49 5.27
chang e 0.02 0.06 -0.04
Euroz one US A
2.75 0.36
0.01 -0.01
Cen tral Ban k Rate 0.75 Czech Rep . Hung ary 5.25 3.50 Poland Slovakia 1.00 1.00 Euro zon e USA 0.25 STO CKS PX BUX W IG Euro sto x DAX S&P
last chn g -25 -25 -25 -25 -25 -75
close 1168.3 23075.1 46417 2830.43 6617.8 1198
ch an ge 0.6% -0.3% -0.3% -1.1% -0.5% 0.4%
Calendar Date
Time Indicator
Forecast
Period
m/m
CZ
4.11.2010 12:30 CNB meeting (%)
11/2010
HU
5.11.2010
09/2010 *P
09:00 Industrial output (%)
Brussels Research (KBC)
0.75
y/y
Consensus m/m 0.75
y/y
Previous m/m
y/y
0.75 2.2
14.9
Global Sales Force
Piet Lammens
+32 2 417 59 41
Peter Wuyts
+32 2 417 32 35
Brussels
Didier Hanesse
+32 2 417 59 43
Corporate Desk
+32 2 417 45 82
Joke Mertens
+32 2 417 30 59
Commercial Desk
+32 2 417 53 23
Mathias Van der Jeugt
+32 2 417 51 94
Institutional Desk
+32 2 417 46 25
+353 1 6646892
London
+44 207 256 4848
Frankfurt
+49 69 756 19372
Dublin Research (KBC Bank Ireland) Austin Hughes Prague Research (CSOB) Jan Cermak
+420 2 6135 3578
Paris
+33 153 89 83 15
Jan Bures
+420 2 6135 3574
New York
+1 212 541 06 97
Singapore
+65 533 34 10
Bratislava Research (CSOB) Marek Gabris
+421 2 5966 8809
Warsaw Research (Kredytbank) Piotr Radzewicz
+48 22 6345 946
Budapest Research (K&H) Gyorgy Barcza
Prague
+420 2 6135 3535
Bratislava
+421 2 5966 8436
Budapest
+36 1 328 99 63
Warsaw
+48 22 634 5210
Moscow
+7 495 228 69 61
+36 1 328 99 89
Our reports are also available on: www.kbcdealingroom.com This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
KBC Bank N.V. - Treasury and Capital Markets Front Office, Market Research
3
