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Erste CEE Macro Comments

5y SovX: In spite of the fact that the SovX CEEMEA includes names like Qatar and Abu Dhabi, the spread between CEE & WE is resuming its downtrend. Is the market focus shifting from North Africa back to Spain & Portugal again?

Analysts' views:

RO Fiscal: Preliminary data shows that budget revenues increased by 17% y/y in February. Government revenues from corporate income tax went up by 17%, those from VAT by 41% (2/3 of the increase was ascribed to the VAT hike and 1/3 to the improvement in collection) while those from excise jumped 55%. The data shows that the fiscal consolidation program is rather advanced in Romania and that this years' budget deficit target of 4.4% of GDP is attainable. The news is positive for the capital markets and reinforces our view regarding an appreciation of the RON to 4.1 in December.

HU Rates: According to the latest information from the government, the names of the four new members who will be appointed to the MPC will be revealed today. Although the new members are expected to pursue a more dovish monetary policy, we do not expect that the new Council can start to cut rates immediately. This would not be positive for CB credibility, nor is it underpinned by comments from the government (denying an increase of the CPI target and calling for a stronger forint earlier in January). Significant decreases of the base rate are also burdened by the fact that we may soon see the start of monetary tightening on major markets (mostly in the Euro Area). Any monetary easing can only take place if CPI risks (second-round effects of price shocks) do not materialize and there are no considerable slippages in the execution of the announced fiscal package. We perceive HUF FX, money and bond markets to be fairly valued at current levels.

Traders' comments:

CEE Government Bonds: CEE bond markets are extremely quiet. HRK is the outperformer with continued strong demand for local currency denominated bonds, especially the 2020.

CEE CDS & Credit: Seeing good two way flows in cash credit. Offers lifted in CEE oil sector names like Gazprom and MOL. Investors showing a preference for CEE over Western European peripherals in the CDS.

Sursa: http://www.erstegroup.com

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