Raiffeisen Research-CEE Weekly Bond Market Outlook

Key upcoming events and data releases

Country Time Indicator Period Forecast Range Last

20 Jan

PL 14:00 Core Inflation, % yoy Dec 3.0 2.8/3.1/3.2 3.024 Jan

HU 14:00 Monetary Council meeting Jan 7.5 7.5/7.5/7.0 7.0TR 13:00 Benchmark Repo Rate Jan 5.75 5.75/5.75/5.75 5.75RU 08:00 Industrial output, % yoy Dec 4.50 2.7/3.5/4.2 3.9025 Jan

HU 09:00 Retail trade, % yoy Nov -0.20 -0.6/-0.2/0.4 0.6TR 13:30 Capacity utilisation, % Jan n.a. n.a. 75.5RU 08:00 Retail sales, % yoy Dec 9.00 5.0/8.4/9.0 8.6RU 08:00 Capital investment, % yoy Dec 7.00 4.0/7.5/10.0 7.727 Jan

HR 11:00 Industrial output, % yoy Dec 0.5 n.a. -0.3PL 10:00 Retail trade, % yoy Dec 11.0 6.5/9.9/12.8 12.6

Highlights

Poland – December data showed a decline to 4.6% yoy (our call was for 4.6% yoy vs. consensus of 4.7% in the range of 4.5% to 4.9% yoy) from 4.8% in November. Fading inflationary dynamics were largely driven by sta-tistical base effects and a somewhat lower increase in food prices. On the data 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 some support as supply-side risks will decrease going forward, due to the current aggressive bond placements without much damage to the yields.

Hungary – 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 – and even more – is fully priced into market yields. FRAs actually indicate that many market participants anticipate at least 100 basis points. Nevertheless, we see a strong probability that the tightening cycle will end next week. The following 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 the pipeline. This would lower the Hungarian risk premium and calm market vol-atility, which currently are the main causes of rate hikes.

Czech Republic – The effect of S&P’s rating downgrades in the Eurozone on the Czech currency proved to be short-lived. CZK is likely to reach our March target unless some unexpected events occur in the Eurozone or Hungary. In our baseline scenario, we expect the CNB to cut its repo rate by 25bp to 0.5% in Q1 2012, due to absence of demand-driven pressures to inflation and the expected recession in the Czech economy. The way we see it, this step by the CNB will most likely come in March.

Forecastcurrent* Mar-12 Jun-12 Sep-12

Poland 4.34 4.45 4.30 4.15

PLN 4.6 4.6 4.3 4.11m-rate 5.1 5.0 4.9 4.55y bond 5.7 5.8 5.6 5.310y bondHungary 302.7 305 300 295HUF 7.3 7.1 7.1 7.11m-rate 9.1 8.4 7.8 7.65y bond 9.0 8.6 8.0 7.810y bondCzech Rep. 25.3 25.2 24.7 24.4CZK 0.6 0.5 0.5 0.51m-rate 2.2 2.4 2.1 2.25y bond 3.4 3.8 3.4 3.410y bondRussia 31.5 32.6 32.6 31.9RUB** 6.1 6.5 6.4 6.51m-rate 8.0 8.4 8.3 8.55y bond 8.5 9.1 8.9 9.1

10y bond 1.29 1.30 1.32 1.35USD

* 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

Recommendations Neutral: PLN T-bonds, HUF T-bonds, RON T-bonds, CZK T-bonds, TRY T-bonds

Issue 3/2012 20 January 2012

CEE WeeklyCEE WeeklyBond Markets OutlookBond Markets Outlook

TRY

RUB

RON

CZK

PLN

USD

HUF

-4 -2 0 2 4

* in %, week-on-weekSource: Thomson Reuters

LCY changes vs. EUR*

10Y-HUF

10Y-PLN

10Y-RUB

5Y-RON

10Y-CZK

10Y-TRY

10Y-BUND

-40 -20 0 20* in bp, week-on-week Source: Thomson Reuters

Yield changes*

Weekly outlook

2 20 January 2012

Romania – Since the beginning of the month, the Finance Ministry borrowed RON 8.6 bn in local government securities, the highest monthly amount since November 2010. Moreover, the borrowed amount will increase given that one more 6-month T-bill auction is due on Monday. The bulk of the debt (67%) was still in short-term T-bills with 12-month maturity. With government secu-rities reaching maturity in January amounting to only RON 4.6 bn, it means that net debt issued is more than RON 4 bn.

Croatia – Strong demand for EUR from the corporate and banking sector pushed EUR/HRK above 7.55 again, triggering another FX intervention. The central bank sold EUR 130 mn to banks at an average rate of EUR/HRK 7.546319. This prevented EUR/HRK from rising even further above 7.56. With the last two interventions, the CNB sold EUR 327 mn to banks while at the same time squeezing HRK liquidity (HRK 2.5 bn) out of the system.

Russia – Perhaps the biggest news this week was the decision of Fitch Ratings move Russia’s rating outlook from positive to stable. We tend to agree with Fitch’s argumentation and especially worry about fiscal slackening amplify-ing fiscal and payment risks for Russia. In another story, Russia’s central bank cut its interventions in the FX market to USD 600 mn in January compared to USD 2.0 bn in December 2011. The bank also said that the size of the cur-rent interest rate corridor "is close to optimal”. The central bank's key refi-nancing rate now stands at 8%, while its deposit rate is at 4%. However, we believe the bank may still tighten the interest rate corridor by another 25bp in the foreseeable future.

Turkey – Apart from some favourable economic news from the global scene, additional support to the TRY came also from the domestic Treasury issuing 1.5 bn of a 10y Eurobond. Ankara seems to put up with the widened risk premium (+445bp over US) taking the window of opportunity with regards to the current risk-on mode. In our view, this is a clear concession to the fact that most CEE countries expect to face elevated refinancing pressure in H1. The local bond market is currently driven by accelerated foreign capital inflows in order to trade the Turkish carry. Next Tuesday’s central bank meeting should bring no changes and bond yields should remain steady ahead of several bond issuances next Monday and Tuesday.

Weekly outlook

320 January 2012

Local currency bonds market overview

CEE local currency bond market snapshot19/01/2012 Maturity Coupon % Ask Price YTM % Spread to Bunds; bp MDur.

Poland

PLN 2y Gov. Bond 25/01/2014 0.00 91.26 4.67 447 2.0

PLN 5y Gov. Bond 25/10/2016 4.75 98.49 5.11 432 4.3

PLN 10y Gov. Bond 25/10/2021 5.75 100.91 5.62 381 7.7

PLN 20y Gov. Bond 25/04/2029 5.75 100.08 5.74 326 10.9

Hungary

HUF 3y Gov. Bond 22/08/2014 6.75 94.82 9.06 868 2.4

HUF 5y Gov. Bond 24/11/2017 6.75 89.83 9.06 827 4.9

HUF 10y Gov. Bond 24/06/2022 7.00 86.22 9.09 728 7.2

HUF 15y Gov. Bond 22/10/2028 6.75 80.85 9.00 668 9.6

Czech Republic

CZK 2y Gov. Bond 16/09/2013 2.80 102.15 1.46 127 1.6

CZK 5y Gov. Bond 26/01/2016 6.95 117.86 2.24 145 3.5

CZK 10y Gov. Bond 29/09/2021 3.85 104.01 3.36 154 8.2

CZK 15y Gov. Bond 25/05/2024 5.70 121.35 3.53 121 9.2

Croatia

HRK 5y Gov. Bond 15/12/2015 5.25 95.70 6.52 573 3.6

HRK 10y Gov. Bond 05/03/2020 6.75 96.00 7.41 560 6.1

Romania

RON 3y Gov. Bond 25/10/2014 6.25 98.82 6.72 634 2.6

RON 5y Gov. Bond 30/04/2016 6.00 96.38 7.00 621 3.7

Russia

RUB 2y Gov. Bond 16/10/2013 6.55 100.75 6.23 604 1.7

RUB 5y Gov. Bond 03/08/2016 6.90 96.96 7.85 706 3.9

RUB 10y Gov. Bond 24/11/2021 8.00 93.60 7.97 616 7.1

RUB 30y Gov. Bond 06/02/2036 6.90 89.00 8.10 567 10.8

Turkey

TRY 2y Gov. Bond 04/12/2013 10.00 99.70 10.17 998 1.8

TRY 5y Gov. Bond 17/06/2015 10.00 100.00 9.99 920 2.9

TRY 10y Gov. Bond 15/01/2020 10.50 105.65 9.48 767 5.8

Prices as of 19 January 2012,15:00 p.m. CETSource: Thomson Thomson Reuters, Raiffeisen RESEARCH

Bond auctions

ISIN Coupon Maturity Volume

23 Jan-12

TR Fixed Bond TRT270116T18 9.0% 2016 n.a.

TR Inflation linked bond n.a. 3.0% 2021 n.a.24 Jan-12

TR Fixed Bond n.a. 10.0% 2013 n.a.

TR Fixed Bond n.a. n.a. n.a. n.a.

Weekly outlook

4 20 January 2012

Poland: Strong issuance without damage to the yields

4.3

4.5

4.8

5.0

5.3

5.5

5.8

6.0

0 1 2 3 4 5 6 7 8 9 10

actual yields yield curve

swap curve last week

PLN yield curve

Source: Thomson Reuters, Raiffeisen RESEARCH

Bond market focus2y 5y 10y 20y

Actual 4.67 5.11 5.62 5.74

Change(% wow) -0.08 -0.13 -0.18 -0.15

Forecast Mar-12 4.70 5.00 5.80 5.75

Spread to bunds

447.2 432.2 380.9 326.4

Change (% wow) -15.9 -9.5 -18.0 -13.1

Prices as of 19 January 2012 ,15:00 p.m. CET

Money market focusMM rates 1m 3m 6m 12m

Actual 4.55 4.78 4.80 4.80

Change (% wow) 0.00 -0.01 -0.01 -0.01

Forecast Mar-12 4.55 4.60 4.51 4.45

Forward rates

3x6 6x9 9x12

4.85 4.77 4.71

Change (% wow) -0.01 -0.01 -0.01


Exchange rate focus19-Jan Mar-12 Jun-12 Sep-12

EUR/PLN 4.33 4.45 4.30 4.15

Change (% wow) 2.0%

USD/PLN 3.35 3.42 3.26 3.07

Change (% wow) 2.5%


Market comment

Recent data confirm the view of the National Bank of Poland (NBP) that the Polish economy kept its solid expansion well into Q4 2011. Adjusted for sea-sonality industrial production increased by 9.5% yoy in December, which looks strong (+9.2% in November). However, leading indicators such as the PMI still signal that there might be a tangible economic slowdown down the road. More-over, the inflation data surprised the markets on the upside recently. December data showed a decline to 4.6% yoy (our call was for 4.6% yoy vs. consensus of 4.7% in the range of 4.5% to 4.9% yoy) from 4.8% in November. Fading infla-tionary dynamics were largely driven by statistical base effects and a somewhat lower increase in food prices. Yesterday, the Polish sovereign continued with its aggressive refinancing in 2012, placing PLN 6.75 bn of 2-year bonds (bids stood at PLN 16.5 bn). On the back of the good domestic fundamentals, healthy sover-eign bond demand and some (short-term) relief in the Eurozone, EUR/PLN inched towards the 4.32/4.33 level in recent days.

Market outlook

On the data front, core inflation is due out today (we expect a stabilisation at 3% yoy, after an increase for several months) and the upcoming NBP inflation expec-tations (27 Jan) will also be crucial. Any tangible drop in surveyed inflation ex-pectations from the December reading (4.8% yoy) will support our view that we will see rather decent disinflation in 2012 opening the door to loosen monetary policy – if EUR/PLN levels allow. Moreover, the local sovereign bond market may enjoy some support as supply-side risks will decrease going forward, due to the current aggressive bond placements without much damage to the yield levels.

Analyst: Gunter Deuber (Gunter Deuber (+431 71707 5707)

(P)review of key economic figures/events

13 Jan-12 CPI, % yoy Dec 4.6 (4.8) Downtick in inflation as we had projected20 Jan-12 Core Inflation, % yoy Dec 3.0 (3.0) Stabilisation of core inflation likely27 Jan-12 Retail sales, % yoy Dec 11 (Nov 12.6) Some moderation in retail sales expected

EUR/PLN


Last: 4.5018 sell 4.2860 Target: 4.2600 - 4.2300 09:05, 05.01.2012 CET A bearish trend-channel was established, thus a sell would be triggered after crossing through the Fibo at 4.2860 -> 4.2600-4.2300, stop 4.3880.

Weekly outlook

520 January 2012

Hungary: Some signs of relief


20 Jan-12 Avg. gross wages Nov 6.0 (Oct 6.1)24 Jan-12 Monetary Council meeting, % Jan 7.5 (Dec 7.0) One more 50bp interest rate hike expected25 Jan-12 Retail trade, % yoy Nov -0.2 (Oct 0.6)

6.06.57.07.58.08.59.09.5

10.010.511.0

0 1 2 3 4 5 6 7 8 9 10


last week swap curve

HUF yield curve


Market comment

Both the international market environment and Hungarian events were supportive for HGBs and HUF. The Hungarian markets rallied strongly: HUF reached year-to-date highs, while yields sank 30-40 basis points and also this week’s auctions met with decent demand. At first sight, the conflict between Hungary and the Eu-ropean Commission escalated, with the EC starting an infringement process on three issues. The reaction of Mr. Orbán, however, calmed the markets: the Hun-garian PM stated that the government will comply in full with the demands of the European Union and even repeated this before the European Parliament.

Market outlook

In line with consensus, we forecast an interest rate hike of 50 basis points next Tuesday which will bring the base rate to 7.5%. This – and even more – is fully priced into market yields. FRAs actually indicate that many market participants anticipate at least 100 basis points. Nevertheless, we see a strong probability that the tightening cycle will end next week. The following meeting is at the very end of February and by that time an agreement between Hungary and the inter-national parties will probably be in the pipeline. This would lower the Hungarian risk premium and calm market volatility, which currently are the main causes of rate hikes. Hungarian assets will be affected strongly by the matter of the interna-tional agreement next week. Judging from Mr. Barroso’s speech and Mr. Rehn’s formal notice, the Commission’s displeasure is not really legal in nature, but more intent-related. Also, according to some leaked information, the IMF might want to bring up the flat PIT-rate at the talks, which is one of the pillars of Hungarian eco-nomic policy. All of this shows that the actual demands of the international par-ties may be a U-turn in economic policy. This does not make an agreement easy. On Tuesday, the PM meets with President Barroso to talk about what needs to be done to start the official talks.

Analyst: Adam Keszeg (+36 1 484 4313)Adam Keszeg (+36 1 484 4313)


Actual 9.06 9.06 9.09 9.00

Change(% wow) -0.32 -0.35 -0.29 -0.30

Forecast Mar-12 8.3 8.4 8.6 8.6

Spread to bunds

867.6 827.2 727.7 667.9

Change (% wow) -44.7 -31.3 -25.8 -28.4



Actual 7.26 7.64 7.93 8.28

Change (% wow) 0.03 0.01 0.01 0.00

Forecast Mar-12 7.1 7.1 7.3 7.7

Forward rates

1x2 3x6 6x9 9x12

7.95 8.31 8.40 8.55

Change (% wow) 0.03 0.01 -0.08 0.06



EUR/HUF 302.10 305.0 300.0 295.0

Change (% wow) 2.5%

USD/HUF 234.00 234.6 227.3 218.5

Change (% wow) 3.0%


EUR/HUF


Last : 303.25 sell Target: 300.00 -289.00 08:57, 05.01.2012 CET The decline should hit the support close by 300 soon and if it crossed through, it would exit the top-ping pattern, stop 310.00->316.00.

Weekly outlook

6 20 January 2012


09 Jan-12 CPI, % yoy Dec 2.4 (Nov 2.5) Effect of VAT hike already priced in09 Jan-12 Retail trade, % yoy Nov 0.5 (Oct 1.5) Positive pre-Christmas surprise16 Jan-12 PPI, % yoy Dec 4.6 (Nov 5.6) Disinflation in industrial prices to continue despite weak CZK

Czech Republic: External balance - strength of the Czech economy

0.00.51.01.52.02.53.03.54.04.55.0

0 1 2 3 4 5 6 7 8 9 10



CZK yield curve


EUR/CZK


Last: 25.257 sell 25.135 Target: 24.988 - 24.750 08:33 , 20.01.2012 CET It broke through the Rectangle`s support and the bullish trend, which indicates another decline towards the next Fibonacci-Retracement, sell 25.135->24.988 - 24.750, stop 25.375-> 25.535.


Actual 1.46 2.24 3.36 3.53

Change(% wow) -0.10 -0.03 -0.07 -0.09

Forecast Mar-12 1.7 2.4 3.8 4.2

Spread to bunds

127.0 145.2 154.3 121.2

Change (% wow) -12.9 1.1 -3.5 -7.1



Actual 0.96 1.17 1.50 1.74

Change (% wow) 0.01 -0.01 0.01 0.00

Forecast Mar-12 0.5 0.6 0.8 1.2

Forward rates

1x2 3x6 6x9 9x12

1.17 1.84 1.92 2.03

Change (% wow) -0.01 0.03 -0.02 0.00



EUR/CZK 25.30 25.2 24.7 24.4

Change (% wow) 1.0%

USD/CZK 19.60 19.4 18.7 18.1

Change (% wow) 1.5%


Market comment

Friday’s result for the Czech current account in November again proved that the external balance is a strong point for the Czech economy. The current account ex-hibited a better-than-expected surplus of CZK 6.61 bn, due to the extraordinary good result of trade balance. Moreover, the deficit on the Czech current account from January to November only reached CZK 70 bn, which is CZK 31 bn better than in the corresponding period in 2010. Such an excellent performance of the Czech current account would imply appreciation pressure on CZK. However, de-spite being fundamentally undervalued (the “fair” value would be around EUR/CZK 24.50 now), CZK can hardly appreciate in the current environment with high risk aversion associated with debt problems in the Eurozone and Hungary. Fortunately, the weak CZK was not able to prevent disinflation in industrial prices in November. The PPI inflation declined from 5.6% yoy in October to 4.7% yoy. Further disinflation is expected due to the favourable base effect.

Market outlook

The effect of S&P’s rating downgrades in the Eurozone on the Czech currency proved to be short-lived. CZK depreciated by 20 hellers to EUR/CZK 25.60 when S&P announced its decision. However, CZK was able to eliminate these losses this week and appreciate to EUR/CZK 25.30, moving closer to our March target of EUR/CZK 25.20. CZK is likely to reach our target unless some unex-pected events occur in the Eurozone or Hungary.In our baseline scenario, we expect the CNB to cut its repo rate by 25bp to 0.5 % in Q1 2012, due to absence of demand-driven pressures to inflation and the expected recession in the Czech economy. The way we see it, this step by the CNB will most likely come in March. One significant risk to this scenario is a weak CZK. We stick to our HOLD recommendation for Czech government bonds.

Analyst: Pavel Mertlik (+420 221 141 800)

Weekly outlook

720 January 2012


10 Jan-12 PPI, % yoy Dec 5.2 (Nov 6.8)16 Jan-12 CPI, % yoy Dec 2.1 (Nov 2.6)27 Jan-12 Industrial output, % yoy Dec 0.5 (Nov -0.3)

Croatia: Strong depreciation pressures on HRK

2.02.53.03.54.04.55.05.56.06.57.07.58.0

0 1 2 3 4 5 6 7 8 9 10



HRK yield curve


Market comment

As we expected, the FX intervention by the CNB at the beginning of January failed to stabilise EUR/HRK for more than few days. Strong demand for EUR from the corporate and banking sector pushed EUR/HRK above 7.55 again, trigger-ing another FX intervention. The central bank sold EUR 130 mn to banks at an average rate of EUR/HRK 7.546319. This prevented EUR/HRK from rising even further above 7.56. With the last two interventions, the CNB sold EUR 327 mn to banks while at the same time squeezing HRK liquidity (HRK 2.5 bn) out of the system. However, money market rates remained almost unchanged as the de-cline in liquidity was too small to cause any significant shortages. On the bond market, not much is happening: trading volumes are low and Eurobonds are un-der selling pressure.

Market outlook

Steady demand for foreign currency due to maturing foreign obligations will con-tinue to generate depreciation pressures on HRK. With steadily low inflows of for-eign capital, HRK will suffer from constant depreciation pressures, which are un-likely to weaken until the start of the tourist season. The way in which the CNB will protect EUR/HRK stability depends on inflows of EUR, which do not look that good at the moment with the deteriorating situation in the EU. The central bank’s international reserves are slightly above EUR 12 bn, which is sufficient to protect exchange rate stability over the medium term. However, given their importance in the preservation of international liquidity and credibility, the use of other monetary measures seems more likely to us. The central bank has other administrative meas-ures at its disposal, such as raising the reserve requirement and/or reducing the minimum required level of foreign liabilities. Should the CNB decide to increase the reserve requirements rate by only 1pp, it would drain off almost all of the ex-cess liquidity from the system and would inevitably lead to higher interest rates.Analysts: Ivana Juric (+385 1 61 74 349) Zrinka Zivkovic-Matijevic (+385 1 61-74338)

Bond market focus2y 5y 10y

Actual 4.63 6.93 7.41

Change(% wow) 0.00 -0.12 0.00

Forecast Mar-12 6.30 7.65 7.75

Spread to bunds 444.0 614.0 560.0

Change (% wow) -3.1 0.1 3.1



Actual 1.52 4.58 5.26 5.65

Change (% wow) -0.28 0.00 0.06 0.08

Forecast Mar-12 4.6 4.9 5.6 6.0

Forward rates

3x6 6x9 9x12

6.00 5.80 6.14

Change (% wow) 0.12 0.03 0.17



EUR/HRK 7.56 7.50 7.48 7.50

Change (% wow) -0.2%

USD/HRK 5.19 5.77 5.67 5.56

Change (% wow) 0.0%


EUR/HRK


Last: 7.5630 buy 7.5650 Target 7.6000 08:45, 05.01.2012 CETThe rally is expected to continue, thus a buy would be triggered if it crossed through the RRL, stop 7.5380 -> 7.5200.

Weekly outlook

8 20 January 2012


13 Jan-12 Foreign trade balance, EUR mn Nov -320 (Oct -280)13 Jan-12 Current account balance, EUR mn Nov 240 (Oct -99)13 Jan-12 FDI net, EUR mn Nov 190 (Oct 120)

Romania: Large debt issued in January

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

0 1 2 3 4 5 6 7 8 9 10



RON yield curve

Source: Thomson Reuters, Bloomberg, Raiffeisen RESEARCH

Market comment

January proved to be a good month for the Finance Ministry, taking into account the large size of the debt raised in the local market. Since the beginning of the month, the Finance Ministry borrowed RON 8.6 bn in local government secu-rities, the highest monthly amount since November 2010. Moreover, the bor-rowed amount will increase given that one more 6-month T-bill auction is due on Monday. The bulk of the debt (67%) was still in short-term T-bills with 12-month maturity. With government securities reaching maturity in January amounting to only RON 4.6 bn, it means that net debt issued is more than RON 4 bn. Bor-rowing costs also decreased by 30bp (3-year tenor) to 40bp (1-year tenor) in January. Both the borrowed amount and the decline in the yields were larger than we expected. Given the persistent tensions on the external markets, we think that non-residents’ interest remained low, and the increasing demand came mainly from local players.

Market outlook

Several factors might explain the increase in investors’ interest in government se-curities this month. First, liquidity conditions in the money market improved in December following a large jump in public spending. In December, the monthly budget deficit amounted to around RON 7.5 bn or 32% of the whole year’s budget deficit. Secondly, additional liquidity was injected into the market by the NBR in the regular 1-week repo operations. And thirdly, there are increasing ex-pectations that central bank will cut the monetary policy rate faster than initially expected (to below 5.5%). So, the ample liquidity and the expectations for more interest rate cuts appear to be key factors behind the fall in yields and the strong demand for government bonds this month. However, it seems that yields have stopped falling in recent days, which fits in with our expectations in the previous report. A period of consolidation seems reasonable in the coming weeks.

Analyst: Nicolae Covrig (+40 21 306 1262)


Actual 6.50 6.72 7.00 7.00

Change(% wow) 0.00 -0.08 0.00 0.00

Forecast Mar-12 6.50 6.90 7.10 7.20

Spread to bunds

631.0 633.6 621.2 518.7

Change (% wow) -2.7 3.6 0.0 3.2



Actual 5.05 5.21 5.74 5.90

Change (% wow) 0.24 -0.02 -0.04 -0.07

Forecast Mar-12 5.0 5.3 5.3 6.1

Forward rates

3x6 6x9 9x12

6.33 6.00 5.95

Change (% wow) -0.06 -0.07 -0.13



EUR/RON 4.34 4.40 4.35 4.30


USD/RON 3.36 3.38 3.30 3.19

Change (% wow) 0.2%


EUR/RON


Last:4.3446 Position: neutral 09:15 , 05.01.2012 CET It struggles to perform a breakout from the long-term congestion area at 4.3650 -> 4.3840, moreover, the Dark-Cloud-Cover indicates a decline to the RSL, sell 4.3290-> 4.3084-4.2925.

Weekly outlook

920 January 2012

Turkey: How long will revived carry trades lend support?

9.50

10.00

10.50

11.00

11.50

12.00

0 2 4 6 8 10Maturity (years)actual yieldsyields a week agoyield curve a week agoactual yield curve

TRY yield curve



Actual 11.15 11.20 11.20 11.25

Change (% wow) 0.00 0.02 0.00 0.00

Forecast Mar-12

11.10 11.20 11.20 n.a.

Implied for-ward rates

1x2 3x6 6x9 9x12

11.10 10.89 10.75 10.37

Change (% wow) 0.06 -0.02 0.04 -0.04

Prices as of 20 January 2012 ,9:42 a.m. CET

Bond market focus3m 1y 2y 5y

Actual 10.81 10.55 10.62 10.33

Change (% wow) -0.36 -0.61 -0.34 -0.26

Forecast Mar-12

n.a. 11.0 11.0 10.5

Prices as of 20 January 2012 9:42 a.m. CET

Market comment

After some recent favourable economic news (mainly Chinese GDP and US job-less claims) had bolstered risk-taking appetite for emerging markets, the Turkish lira rallied for a fourth day on Thursday, heading for its strongest level in seven weeks. Depreciating approximately 20% versus the greenback in 2011, this year’s gains amounted to 3.4% as of yesterday afternoon. Favourable support to the TRY came also from the domestic Treasury issuing 1.5 bn of a 10y Eurobond. Although the 6.35% yield was almost 100bp higher than at a similar auction in October, Ankara seems to put up with the widened risk premium (+445bp over US) taking the window of opportunity with regards to the current risk-on mode. In our view, this is a clear concession to the fact that most CEE countries expect to face elevated refinancing pressure in H1. TRY 903 bn (2018 FRN) and TRY 4.2 bn (2013 zero coupon) were collected successfully last Tuesday. According to the last debt management report, the Treasury has USD 2.7 bn in external debt re-payments in January and February, while a relatively small fraction should be is-sued on the Japanese market. However, since the TCMB took some pressure from the short end of the curve via the provision of lira liquidity at a lower cost during the past week, banks' sales of short term bonds have been reduced. Prior to that, the bank had tightened liquidity through intra-day repo auctions on "exceptional days" to support the ailing lira.

Market outlook

Although Turkey’s public finances are in a good shape (2011 FY deficit at 1.4% of GDP and public debt to GDP ratio below 40%), the local bond market is cur-rently driven by accelerated foreign capital inflows in order to trade the Turkish carry. Next Tuesday’s central bank meeting should bring no changes; the TCMB should stick to its liquidity management priority. According to our projections, we think the TRY may reverse some of its recent outperformance in the weeks to come, as we cannot detect any signs of sustainable improvement on the exter-nal markets. Bond yields should remain steady ahead of several bond issuances next Monday and Tuesday.Analyst: Stephan Imre (+43 1 71707 6757)


16 Jan-12 Unemployment, % Oct 9.1 (Sep 8.8) As expected, economic cooling reached the labour market24 Jan-12 Benchmark Repo Rate Jan 5.75 (Dec 5.75) Continuation of multiple rate liquidity managment policy expected25 Jan-12 Capacity utilisation, % Jan n.a. (Dec 75.5) Slight deterioration expected

Exchange rate focusactual Mar-11 Jun-11 Sep-11

EUR/TYR 2.36 2.47 2.51 2.50


USD/TYR 1.83 1.90 1.90 1.85



EUR/TRY


Last: 2.3640 Position: neutral 09:11, 05.01.2012 CET The recovery at the Fibo might turn out to be a Spike which would indicate a pull-back into the trend-chan-nel, buy 2.3840 -> 2.4035 - 2.4460, sell 2.3195 -> 2.3055.

Weekly outlook

10 20 January 2012

(P)review of key economic figures/events24 Jan-12 Industrial output, % yoy Dec 4.5 (Nov 3.9)25 Jan-12 Retail sales, % yoy Dec 9.0 (Nov 8.6)25 Jan-12 Capital investment, % yoy Dec 7.0 (Nov 7.7)

Russia: Outlook down from positive to stable

6.0

7.0

8.0

9.0

1 2 3 4 5 6 7 8Duration (years)

actual yieldsyield curve a week agoyield curve

RUB yield curve


Market comment

Perhaps the biggest news this week was the decision of Fitch Ratings move Rus-sia’s rating outlook from positive to stable. Among the reasons for lowering the outlook on Russia the agency cited poor governance indicators and unstable pol-itics increasing the risk of capital flight. We tend to agree with Fitch’s argumenta-tion and especially worry about fiscal slackening amplifying fiscal and payment risks for Russia. Although the Russia sovereign retains the external net creditor po-sition, its private sector remains a net debtor by a large degree. We predict that Russia is unlikely to see rating upgrades in the next twelve months, while down-grade risks for Russia are increasing. This, in the course of next six months, can negatively reflect on Russia’s risk premium, pushing CDS spreads higher in com-parison to the present levels.In another story, Russia’s central bank cut its interventions in the FX market to USD 600 mn in January compared to USD 2.0 bn in December 2011. The bank said it will continue controlling money supply dynamics, as it aims to keep full-year in-flation at 5-6% after inflation eased to a record post-Soviet low of 6.1% in 2011. The central bank also continues its transition from controlling the exchange rate as its main monetary tool to targeting inflation instead, but still keeps the rouble within a range against a target euro-dollar basket. The bank said that the size of the current interest rate corridor "is close to optimal”. The central bank's key refi-nancing rate now stands at 8%, while its deposit rate is at 4%. However, we be-lieve the bank may still tighten the interest rate corridor by another 25bp in the foreseeable future.

Market outlook

Russian capital markets remain under bullish pressure pushing stock prices and the rouble up, as global markets experience some short-term enthusiasm after better macro statistic in the USA and some positive news from Europe. However, market enthusiasm might be short-lived as the risk of global economic slowdown remains present.Analyst: Gintaras Shlizhyus (+43 1 71707 1343)


Actual 6.34 7.11 8.04 8.85

Change(% wow) 0.04 -0.03 -0.09 0.02

Forecast Mar-12 6.45 7.40 8.40 n.a.



Actual 6.22 7.16 7.56 8.50

Change (% wow) 0.01 0.00 -0.01 -0.07

Forecast Mar-12 6.45 6.90 7.05 n.a.

Forward rates

1x2 3x6 6x9 9x12

7.36 8.05 n.a. n.a.

Change (% wow) -0.01 -0.14 n.a. n.a.



EUR/RUB 40.53 42.38 43.04 43.04

Change (% wow) 0.2%

USD/RUB 31.32 32.60 32.60 31.88

Change (% wow) 1.0%


EUR/RUB


Last: 31.287 sell 31.000 Target: 30.620 - 30.020 09:03, 05.01.2012 CET The decline through the RSL gives us a bearish indica-tion, sell 31.000 ->30.620 - 30.020, stop 32.206.

Weekly outlook

1120 January 2012

Summary: Ratings & macro data

Country ratings: CEE, SEE, CIS

S&P Moody's Fitch

LCY FCY Outlook LCY FCY Outlook LCY FCY Outlook

CEE

Poland A A- stable A2 A2 stable A A- stable

Czech AA AA- stable A1 A1 stable AA- A+ stable

Hungary BB+ BB+ negative Ba1 Ba1 negative BBB- BB+ negative

Slovakia * A+ A+ negative A1 A1 stable A+ A+ stable

Slovenia * AA- AA- negative A1 A1 negative AA- AA- negative

SEE

Bulgaria BBB BBB stable Baa2 Baa2 stable BBB BBB- stable

Croatia BBB- BBB- negative Baa3 Baa3 stable BBB BBB- negative

Romania BB+ BB+ stable Baa3 Baa3 stable BBB BBB- stable

Serbia BB BB stable nr nr - BB- BB- stable

CIS

Belarus B- B- negative B3 B3 negative nr nr -

Kazakhstan BBB+ BBB+ stable Baa2 Baa2 stable BBB+ BBB positive

Russia BBB+ BBB stable Baa1 Baa1 stable BBB BBB stable

Ukraine B+ B+ stable B2 B2 negative B B stable

Turkey BBB- BB positive Ba2 Ba2 positive BB+ BB+ stable

*Eurozone (Euro currency) membersSource: rating agencies websites

Main macro data & forecasts*

Country Year GDP, % avg.

yoy

CPI, % avg.

yoy

Unem-ployment,

%

Nominal wages,

EUR

Fiscal balance,

% GDP

Public debt, %

GDP

Export**, % GDP

C/A, % GDP

Ext. debt, % GDP

FXR*** % ext. debt

Import cover,

months

Poland 2010 3.8 2.6 12.1 808 -7.9 53.4 34.5 -4.1 66.4 29.7 6.5

2011e 3.9 4.3 12.4 822 -5.4 55.9 36.2 -3.9 70.1 30.0 6.52012f 2.2 2.5 12.4 809 -5.0 56.5 37.5 -4.0 76.0 29.8 6.8

Hungary 2010 1.3 4.9 11.2 735 -4.2 81.3 73.5 1.1 139.4 24.9 6.12011e 1.5 3.9 11.1 759 0.0 74.6 79.7 0.9 133.9 25.8 5.72012f -2.0 5.0 11.7 745 -3.5 77.4 83.5 1.3 139.1 27.0 6.1

Czech Rep. 2010 2.7 1.5 9.0 947 -4.8 37.6 63.9 -3.1 47.8 44.8 4.12011e 1.9 1.9 8.6 995 -4.3 40.3 68.8 -1.8 45.9 41.2 3.52012f -1.2 2.6 9.0 1021 -4.9 44.8 67.6 -2.9 47.3 41.4 3.6

Romania 2010 -1.9 6.1 7.6 452 -6.9 31.0 30.6 -4.1 75.8 35.1 9.02011e 2.5 5.8 5.3 470 -4.6 32.9 33.9 -3.8 74.1 32.7 7.62012f 0.5 3.5 5.0 481 -3.0 34.1 35.9 -4.0 75.7 30.4 6.9

Croatia 2010 -1.2 1.1 17.4 1054 -4.9 41.2 19.8 -1.1 101.3 22.9 8.52011e 0.5 2.3 18.0 1048 -5.5 45.0 20.3 -0.5 102.6 24.5 9.42012f -1.0 2.0 18.5 1062 -4.5 52.4 20.5 0.0 104.1 24.8 9.9

Russia 2010 4.0 6.9 7.2 538 -4.1 9.4 26.4 6.1 32.8 92.8 22.62011e 3.8 8.6 6.7 600 0.5 10.2 29.4 4.8 33.3 94.5 19.62012f 3.2 6.2 7.0 625 -1.5 12.0 27.5 2.3 32.8 84.7 17.2

Turkey 2010 8.9 8.6 11.7 366 -3.7 45.9 16.5 -6.6 39.1 27.9 5.42011e 8.0 6.4 10.0 342 -1.5 41.2 18.4 -9.9 45.3 25.5 4.62012f 1.5 9.5 10.5 340 -3.0 40.6 21.3 -8.3 45.1 20.3 3.3

* only for countries included in CEE bond market weekly (under revision), ** Export of Goods only, *** FXR - Foreign exchange reservesSource: Thomson Financial Datastream, National Statistics

Weekly outlook

12 20 January 2012

Raiffeisen Bank International AG

Raiffeisen Bank International AG, Vienna Global Markets Head: Nicolaus Hagleitner Tel: +43 1 71707 1467Head of International Sales: Luca Scalzini Tel: +43 1 71707 3981Head FI Sales (AUT/GE/LIE): Hans Rettl Tel: +43 1 71707 3300Corporate Sales: Wolfgang Kalinka Tel: +43 1 71707 3959

Belgrade: Raiffeisenbank a.d. SerbiaTreasury: Branko Novakovic Tel: +381 11 2207 131

Bratislava: Tatra banka, a.s.Treasury: Miroslav Paracka Tel: +421 2 5919 1386Sales: Milan Cavojec Tel: +421 2 5919 1212

Bucharest: Raiffeisen Bank S.A.Treasury: Cristian Sporis Tel: +40 21 306 1210Sales: Razvan Szilagyi Tel: +40 21 306 1205

Budapest: Raiffeisen Bank Zrt.Treasury: Gabor Liener Tel: +36 1 484 4304Sales: Zsolt Matolcsi Tel: +36 1 484 4840

Kiev: Raiffeisen Bank AvalTreasury: Vladimir Kravchenko Tel: +380 44 490 8808

Maribor: Raiffeisen banka d.d. SloveniaTreasury: Marko Stolica Tel: +386 2 229 3183

Minsk: Priorbank JSC BelarusTreasury: Andrey Filazafivich Tel: +375 17 289 9312

Moscow: ZAO Raiffeisenbank AustriaSales: Arsen Manoukian Tel: +7 495 721 9978

Raiffeisen Bank International London BranchSales: Lorna Robertson Tel: +44 20 7933 8113

Raiffeisen Centrobank AG, ViennaEquity Capital MarketsHead: Wilhelm Celeda Tel: +43 1 515 20 402Sales: Klaus della Torre Tel: +43 1 515 20 472

Prague: Raiffeisenbank a.s.Treasury: Vit Brdlik Tel: +420 221 141 145Sales: Michal Michalov Tel: +420 221 141 830

Pristina: Raiffeisen Bank Kosovo JSCTreasury: Berat Isa Tel: +381 38 226400 129

Sarajevo: Raiffeisen BANK d.d. Bosna i HercegovinaTreasury: Lejla Kurtovic Tel: +387 33 287 144Sales: Haris Mustafic Tel +387 33 287 127

Raiffeisen International Bank Singapore BranchSales: Thomas Neidhardt Tel. +65 6305 6108

Sofia: Raiffeisenbank (Bulgaria) EADTreasury: Evelina Miltenova Tel: +359 2 91985 441

Tirana: Raiffeisen Bank Sh.a. AlbaniaTreasury: Joan Canaj Tel: +355 42 275 510 1122

Warsaw: Raiffeisen Bank Polska S.A.Treasury: Miroslaw Winiarczyk Tel: +48 22 585 26 00Sales: Adam Pers Tel: +48 22 585 26 26

Zagreb: Raiffeisenbank Austria d.d.Treasury: Ivan Zizic Tel: +385 1 46 95 076

Editor: Raiffeisen RESEARCH GmbHA-1030 Vienna, Am Stadtpark 9Tel.: +43 1 717 07-1521

This report was completed on 20 January 2012.

Head of Raiffeisen RESEARCH:Peter Brezinschek (1517)

This document does not constitute an offer or invitation to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. This document is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. Any investment decision with respect to any securities of the respective company must be made on the basis of an offering circular or prospectus approved by such company and not on the basis of this document. RBI may have effected an own account transaction in any investment mentioned herein or related investments and or may have a position or holding in such investments as a result. RBI may have been, or might be, acting as a manager or co-manager of a public offering of any securities mentioned in this report or in any related security. Information contained herein is based on sources, including annual reports and other material which might have been made available by the entity which is the subject of this document. RBI believes all the information to be reliable, but no representations are made as to their accuracy and completeness. Unless otherwise stated, all views (including statements and forecasts) are solely those of RBI and are subject to change without notice. Investors in emerging markets need to be aware that settlement and custodial risk may be higher than in markets where there is a long established infrastructure and that stock liquidity may be impacted by the numbers of market makers which may therefore impact upon the reliability of any investments made as a result of acting upon information contained in this document. Special regulations for the Republic of Austria: This document does not constitute either a public offer in the meaning of the Kapitalmarktgesetz („KMG“) nor a prospectus in the meaning of the KMG or of the Börsegesetz. Furthermore this document does not intend to recommend the purchase or the sale of securities or investments in the meaning of the Wertpapieraufsichtsgesetz. This document shall not replace the necessary advice concerning the purchase or the sale of securities or investments. For any advice concerning the purchase or the sale of securities or investments kindly contact your RAIFFEISENBANK. Special regulations for the United Kingdom of Great Bri-tain, Northern Ireland (UK) and Jersey (Channel Islands): Raiffeisen Bank International AG (RBI). This publication has been either approved or issued by Raiffeisen Bank In-ternational AG in order to promote its investment business. RBI London Branch is authorised by the Austrian Financial Market Authority (FMA) and subject to limited regu-lation by the Financial Services Authority (FSA). Details on the extent of the London branch‘s regulation by the Financial Services Authority are available on request. This publication is not intended for investors who are Retail Customers within the meaning of the FSA rules and should therefore not be distributed to them. Neither the infor-mation nor the opinions expressed herein constitute or are to be construed as an offer or solicitation of an offer to buy (or sell) investments. RBI may have effected an Own Account Transaction within the meaning of FSA rules in any investment mentioned herein or related investments and or may have a position or holding in such investments as a result. RBI may have been, or might be, acting as a manager or co-manager of a public offering of any securities mentioned in this report or in any related security. The RBI Jersey marketing representative office is not regulated by the Jersey Financial Services Commission as it does not perform any financial services activity in Jersey as defined by the Financial Services (Jersey) Law 1998 (FSJL).Special regulations for the United States of America (USA) and Canada: This document or any copy hereof may not be taken or transmitted or distributed, in the USA or Canada or their respective territories or possessions nor may it be distributed to any USA-person or person re-sident in Canada by any means other than via a US Broker Dealer. Any failure to comply with these restrictions may constitute a violation of USA or Canadian securities laws. Detailed disclaimer and disclosure as per Sect. 48f of the Stock Exchange Act: http://www.raiffeisenresearch.at -> “Disclaimer”

Date post:	29-Nov-2014
Category:	Documents
Upload:	ciocoiu-vlad-andrei
View:	292 times
Download:	0 times

Raiffeisen Research-CEE Weekly Bond Market Outlook

Documents