Czech issuance calendar for the fourth quarter will be surprisingly thin

Posted on : 24-08-2010 | By : Andrew Miller | In : Financial News

Tags: Czech Issuance Calendar, Fourth Quarter, Issuance Calendar, Thin

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Currencies: Another CNB Board member warns that low rates will not last foreverFixed Income: Czech issuance calendar for the fourth quarter will be surprisingly thin

Czech Republic

The koruna weakened yesterday reacting on a series of bad US eco numbers. It moved up to the EUR/CZK 24.90 level for a short period, however it has erased most of its losses by the evening due to a correction on Wall street.

Today, the currency might benefit from a slightly weaker dollar or from the comments of the new member of the CNB Bank Board Kamil Janacek. He has indicated that the period of record low interest rates is moving slowly to its end and suggested that prolonging the period can seriously harm the Czech economy. Quite surprisingly he has thus joined hawks’ voice of his colleague Eva Zamrazilova. However, we think that the period of rate hikes is really a matter of distant future that is why the impact of the Janacek’s comments on the Czech FX and fixed income market should be limited.

Much more interesting news came from the Ministry of Finance, which suggested that the issuance calendar in the last quarter will be much thinner than that of the third quarter (app. 50bl bonds). Regarding the Eurobond issuance, the Czech Ministry of Finance said the amount is still uncertain. Surprisingly low issue activity is supposed to be allowed thanks to utilization of reserves, higher issuance of government treasury bills and a lower than expected deficit.

Currencieschange EUR/CZK24.87-0.1% EUR/HUF282.50.0% EUR/PLN3.982-0.5% USD/PLN3.150-0.8% EUR/USD1.2730.6% USD/JPY84.70.3%

Hungary

The Hungarian forint weakened during the day after the Economic Ministry denied press reports that the government plans the resume talks about a new IMF program. The Ministry said that talks in October will be part of the regular quarterly review of the 2008 program, which will be the final review.

The EUR/HUF pair slid to 285.50 from 281.50 in the morning session, but recovered quickly to 282.50 in the afternoon on the back of a somewhat more positive sentiment on US equity markets.

The Hungarian fixed income market also recovered a bit with the currency, but yields remained generally higher at around 6.90% at the long-end, while short-term rates remained unchanged.

There is a visible split at the central bank’s Monetary Council, where some of the members wanted a rate hike, while majority decided to keep the base rate unchanged at 5.25% on Monday. The new Inflation Report revised next year’s inflation outlook higher at 3.5%, above the target, which would warrant a rate hike, while others could continue to wait-and-see on the new government policies for 2011.

Bonds 2Ychange Czech Rep.1.77-0.07 Hungary 3Y6.79-0.05 Poland4.56-0.04 Slovakia1.750.17 Eurozone0.610.01 USA0.510.02

Bonds 10Ychange Czech Rep.3.36-0.06 Hungary 7.06-0.05 Poland5.360.00 Slovakia3.660.05 Eurozone2.17-0.02 USA2.530.02

Poland

The Polish zloty has returned under the EUR/PLN 4.00 yesterday, following the better results of German index Ifo which is an important indicator for most of Central European economies.

According to the last survey, support of the ruling Civic Platform reaches 48% which is a great result after the four years of governing. However, the parliamentary elections are to come in more than a year from now, and freezing of some of the expenditures together with elevation of VAT has still not entered to operation.

The Polish zloty is expected to follow the evolution of global markets rather than the domestic politics.