CEE Weekly Bond Markets Outlook

Inside the CEE Weekly Bond Market issue:

In Poland there are two important events. First the presidential election should bring a victory of PO candidate Donald Tusk, but he should have an absolute majority which means that there will be a second round. Second inflation is likely to rise slightly next week. Neither of the two events should have a negative impact on the zloty or on the Polish bond market.

In Hungary the flood of negative news has finally stopped and the market showed first signs of consolidation. Nevertheless market sentiment is still looking rather shaky and trendless trading could well continue during the coming weeks.

Due to a negative base effect Czech inflation should have jumped beyond 2% in September. If our forecast of 2.5% yoy comes true it could push yields higher, even though the smaller financing need of the Ministry of Finance should provide somewhat of a cushion. Thus, we have changed our recommendation from “hold” to “sell” for CZK government bonds with maturities of 5 years or more.

While the positive economic outlook should provide a room for an appreciation of the Slovak crown, the economic fundamentals are currently overshadowed by the tensions on both the domestic political scene and the muted sentiment within the region.