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Erste CEE Macro Comments: BNR Inflation report and MinFin auction

The NBR raised its inflation forecast for 2011 to 3.6% (from a previous 3.4%) but remains optimistic on inflation outlook and believes that inflation will again be on target in 4Q11.

RO Inflation Report: The governor said that the new inflation forecast has no significant implications for monetary policy. The NBR's favourite inflation measure, the adjusted CORE 2 inflation (CPI excluding administered prices, volatile prices, tobacco and alcohol prices) will decrease towards 2% in the next quarters. Mr. Isarescu implied that minimum reserve requirements could be cut in the future. He also said that the NBR carried out no interventions on the FX market in January. Keeping all of this in mind, we maintain our key rate forecast of 5.75% for December.

RO Bonds: The MinFin sold 1Y T-bills worth RON 1.5bn at 6.73%, slightly up from 6.69% at the previous auction. Demand was strong, investors placed total bids worth RON 4.1bn, but the MinFin did not increase the volume and issued RON 1.5 bn as planned. We maintain our bullish view on Romanian bonds and foresee 5Y yields at 6.6% in September.

CZ CNB: Czech president Vaclav Klaus chose economist and former director of the CERGE institute, Lubomir Lizal, to replace Robert Holman on the central bank board. Another member of the rate setting body, Pavel Řežábek, will be reappointed for his second and final term.

Traders' comments:

HUF: Supported by the positive performance of equities bond and swap markets had a bullish start into the week, with 2y IRS trading 4-5 bps lower and better bids for bonds as well, so ASW remained stable.

PLN: Yesterday's issue of 5Y bonds in CHF was quite successful, the MOF increased the volume from CHF 200 mio. to CHF 350 mio., but markets remain in range trading, bond yields went up by 2-3 bp up on small turnover.

RON: Quiet day as everyone was waiting for the auction results which came in as expected. The MinFin sold a volume of RON 1.6 bln (slightly higher than the planned amount of ON 1.5 bn) at an average yield of 6.73%, 4 bps above the yield at the previous tender.

CEE CDS: Although WE CDS widened again by some bps the SovX CEE closed tighter again supported by strong equities.

Sursa: http://www.erstegroup.com

Tags: inflation auction minfin bnr

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