Research Detail
| 2023/10/11 / Erste Group Research |
CEE bond markets took a break before further rally The recent correction on bond markets halted the superior YTD performance of CEE local currency bonds. On the other hand, it provided a second chance for those who would like to bet on a further decline of inflation paving the way to normalization of interest rates. Ongoing disinflation and weak economic performance speak in favor of swift rate cuts in CEE. Monetary easing in Hungary and Poland is in full swing, we expect continuation of monetary easing with 600bp and 75bp rate reduction, respectively in pipeline. Czechia is about to start its easing cycle in December or 1Q24, bringing rates from current level of 7% to 4.25% by 3Q24. Romania will start easing only in 2Q24, at earliest. On the other hand, uncertainty about oil prices, concerns on potential inflation-wage spiral and stress on global bond markets represent clear risk to the pace of monetary easing and CEE bond markets. Slovakia has already covered its full-year gross and net financing needs reinforcing its cash buffer ahead of large bond redemption due in November. Hungary and Romania have already fulfilled their net financing needs, so they can be more selective in rollover of their maturing debt in 4Q23. Croatia and Czechia still needs to issue more net debt on top of roll over of large redemptions scheduled for November. Hungary and Romania are likely done with foreign issuance this year; Croatia and Poland will face large FX redemptions in January, which might get pre-financed. At beginning of October, Fitch followed S&P’s move from September and changed Croatia’s rating outlook to positive. Croatia is a good candidate to receive a bump in rating in 2024. Fitch keeps Hungary’s rating outlook at negative, waiting for resolution of frozen EU funds that should be unlocked by year-end according to their baseline. Rating agencies are waiting for more clarity on consolidation effort and structural reforms before taking any rating action (i.e. removal of negative outlook for Czechia and Slovakia). |
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General information
| Author | Erste Group Research |
| Date | 2023/10/11 |
| Language |  |
| Product name | CEE Bond Market Report |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | CEE, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia |
| Currency in focus | Croatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar |
| Sector in focus | - |
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