CEE Weekly

Bond auctions in Poland, Hungary and Romania had been disappointing. Monetary easing continued in Poland and we expect the easing cycle to continue.

The Czech Republic stays with its ultra-lax monetary policy, but sees no need to apply non-orthodox measures (FX-interventions). In Hungary monetary easing is also set to continue and we expect further downbeat news from the real economy in Poland, the Czech Republic and Hungary.


The sketched trends, that result in improving funding conditions but also lower loan demand and pressure on asset quality, are reflected in the Emerging Markets Bank Lending Conditions Survey data (including CEE) released end of January by the IIF (covered in our Focus on section, p. 2). Recent data in Russia are showing a slowdown. However, monetary policy looks constrained by still relatively high inflation levels and an uptick of inflationary pressure. The same holds true for SEE countries like Serbia and Romania.


Romania – We misread the demand for Romanian government debt instruments this week, having thought that non-residents’ appetite could still translate into larger allocation. Actually, the amount tapped (RON 1.7 bn) proved just a tad larger than the plan of RON 1.5 bn (due to 3Y tender, when the Ministry of Finance tapped more than planned by RON 240 mn).


We see the convergence of yields to secondary market levels as a correction after the strong demand for T-bonds seen in January and believe that the upside pressure is likely to be limited by tapping only the plan. The NBR is likely to continue to gradually ease liquidity conditions (only a renewed flare-up in depreciation pressure on the leu could prevent the NBR from implementing a looser stance), providing further support for the front end of the bond, curve as our latest forecasts show.


At the presentation of Quarterly Inflation Report, the NBR Governor hinted that the increase in energy prices was behind the monthly CPI dynamics in December and this is also likely to impact the January reading. Inflation data due out on Tuesday are likely to show acceleration to 5.8% yoy from 5.0% previously.


Analyst: Ana-Maria Morarescu (+40 21 306 1265)