Eyeopener – Fed divided on QE
4 January 2013
Optimism after deal on US fiscal cliff only temporary, as
Fed discussed halting QE in 2013
Zloty depreciating due to lower risk appetite, EURUSD
keeps going down
Domestic bonds lost after poor auction results
Today, services PMI in Germany and euro zone, monthly
employment report in the US
Optimism that arose due to avoiding fiscal policy tightening in the
US at the beginning of 2013 was quickly replaced by concerns
about the spending cuts and raising the debt ceiling, which still have
to be agreed by the US policymakers. As a result the sentiment was
rather sour from the very beginning of Thursday’s session, which
was reflected in the euro depreciation vs the dollar, slight losses on
the stock markets and stop of German and US yield rise. Only data
from the US labour market helped to calm the situation.
Minutes of the last Fed meeting, released last evening, show that
some FOMC members think the quantitative easing programme
should end in 2013, as its longer existence may threaten the
financial system stability. This information has substantially cooled
the market sentiment, which was reflected in market declines on
Asian bourses (with an exemption of Japan).
On Thursday the EURUSD exchange rate was moving south due to
rather pessimistic market sentiment. In due course, at the end of
the domestic session the rate was close to 1.31. Overnight the euro
kept on losing against the greenback, the trend was supported by
release of minutes of FOMC meeting, which limited the investors’
hopes for an enlargement of securities purchase programme by the
US central bank. As a result, at today’s opening EURUSD is close
to 1.303. It seems that today’s monthly non-farm payrolls may be
crucial, yesterday’s ADP amplified hopes for a positive surprise. If
data prove to be better than expected, they may support the dollar
against the euro. First support for EURUSD is slightly below 1.30.
The EURPLN and USDPLN stayed in the upward trend during the
yesterday’s session due to lower demand for risky assets. Better
than expected data from the US did not help the zloty much. At the
end of the day the EURPLN was close to 4.08 and USDPLN
hovered around 3.12. Further decline of the EURUSD and poor
market sentiment persisting on the global market put negative
pressure on the domestic currency also during the night.
Additionally, depreciation of Czech crown versus the euro harmed
the zloty (currency of our neighbouring country is under pressure
due to possible interventions of Czech central bank aiming at
weakening the crown versus the euro). Consequently, today in the
morning the EURPLN is close to 4.10 and USDPLN reached 3.15.
Market mood is moderately negative at the beginning of the session
and this is also constraining the potential for zloty’s appreciation.
Domestic currency did not react on yesterday’s ADP data and this
suggests this may be the case also regarding today’s non-farm
payrolls. Vital levels for the EURPLN are 4.05 and 4.12.
On the domestic debt market Thursday was a next day of
considerable weakening of Polish bonds, this time the whole curve
suffered. The trade volume was high. Further increase of yields was
this time driven mainly by results of yesterday’s auction (details
below). Even some recovery seen on the Bund market did not
manage to support Polish debt. Only during the first two days of
2013 the IRS curve moved up by 12bps in case of 2Y and 17-18bps
for 5Y and 10Y. Upward move was also continued on the FRA
market. After yesterday’s session for the first time since late
November the market expects 3M WIBOR to be lower by less than
100bps in next 6 months. Only in mid-January the CSO will release
data that may in our opinion support expectations for rate cuts by
the MPC and help the domestic bonds to pare at least some part of
losses.
The Ministry of Finance sold yesterday DS1023 bond for PLN3.2bn
and WS0429 for PLN485m. Just like we expected, the total supply
was inside the range expected by the Ministry (PLN3-5bn), but total
demand was at PLN4.9bn, below upper band of planned supply.
Additionally, yields at the auction were a few basis points above
market levels. Results of the auction were not similar to those in
2012 when yields at the auction were below market levels and the
demand was well above the (planned) supply. Deputy finance
ministry, Jacek Kowalczyk, commented on the auction results that
“some investors, especially located in London, did not return from
holidays yet”. He added that the resort still wants to cover 50% of
this year’s borrowing needs in Q1. Additionally, Kowalczyk said that
“the zloty is in appreciative trend, which is not favourable as regards
economic slowdown”.
The deputy finance minister Hanna Majszczyk said flash estimates
of budget deficit in 2012 amount to PLN31bn, i.e. by PLN4bn less
than outlined in the budget bill. The Ministry of Treasury informed
that privatization inflows in 2012 amounted to PLN9.16bn, while
income from dividends amounted to PLN7.77bn.
The Prime Minister Donald Tusk said that VAT tax cut in 2014 is not
certain. In his view, the state of public finance in 2013 will be crucial
when making decision about taxes. Tusk added that state-owned
investment company Inwestycje Polskie should be established in
late spring and first projects financed by this entity should start
already this year.
0,
ECONOMIC ANALYSIS DEPARTMENT
TREASURY SERVICES
ul. Marszałkowska 142. 00-061 Warszawa
email: [email protected]
fax +48 22 586 83 40
Web site: http://www.bzwbk.pl
Maciej Reluga (Chief Economist)
Piotr Bielski
Agnieszka Decewicz
Marcin Sulewski
Marcin Luziński
+48 22 586 83 63
+48 22 586 83 33
+48 22 586 83 41
+48 22 586 83 42
+48 22 586 83 62
Poznań
Warszawa
Wrocław
+48 61 856 5814/30
+48 22 586 8320/38
+48 71 369 9400
Eyeopener – daily update
Zloty exchange rate (fixing)
F / X ra t e s ( t o da y’ s o pe ning)
Last
auct io n
A ver ag
e yi el d
3.17
3.40
3.90
8
13
10
23.10.12
4.10.12
3.01.13
3.856
4.224
3.847
3.96
T - bo nds
USD (left axis)
B o nd ( t er m)
OK0714 (2Y)
P S0418 (5Y)
DS1023 (10Y)
%
3 Jan
Y ield ( %)
C hang e
(bp)
3.98
3.06
1 Jan
f i x i ng
4.0770
3.1005
-
30 Dec
c l o se
4.0852
3.1196
1.3095
28 Dec
o pe n
4.0714
3.0968
1.3148
4.00
3.08
26 Dec
ma x
4.0916
3.1252
1.3170
4.02
3.10
24 Dec
mi n
4.0626
3.0889
1.3082
4.04
3.12
22 Dec
EURP LN
USDP LN
EURUSD
4.06
3.14
20 Dec
T he zlo t y t ra ding ra nge s
4.08
3.16
18 Dec
0 3 .0 1.2 0 13
4.10
3.18
16 Dec
-
4.12
3.20
14 Dec
F ina nc ia l m a rk e t re v ie w
4.14
3.22
12 Dec
*fo r 100JP Y/100HUF
4.16
3.24
8 Dec
3.1889
0.5507
0.5641
0.4818
0.1624
1.4198
10 Dec
CA DPLN
DKKP LN
NOKP LN
SEKP LN
CZKP LN
HUFP LN*
6 Dec
1.3015
3.1564
4.1080
3.3982
3.5913
5.0679
4 Dec
EURUSD
USDP LN
EURP LN
CHFP LN
JPYP LN*
GB P PLN
3.26
EUR (right axis)
T-bonds yields
4.20
4.00
3.80
IR S ra t e s ( M id)
3.40
3.20
2Y
5Y
3 Jan
1 Jan
30 Dec
28 Dec
26 Dec
24 Dec
3.00
22 Dec
0
0
0
1
2
2
3
20 Dec
0.33
0.40
0.51
0.67
0.85
1.40
1.68
18 Dec
-1
-1
-3
-2
-2
-1
-2
(bp)
16 Dec
0.32
0.38
0.48
0.65
0.86
1.52
1.85
3.60
C ha nge
%
14 Dec
3
7
8
8
11
10
10
(bp)
12 Dec
3.49
3.48
3.45
3.47
3.53
3.66
3.73
%
10 Dec
1L
2L
3L
4L
5L
8L
10L
(bp)
EA
C ha nge
8 Dec
%
US
C ha nge
6 Dec
PL
4 Dec
T E RM
10Y
WIB O R ra t e s
%
3-month money market rates
T ER M
%
D a ily c ha nge
( bp)
O/N
T/N
SW
2W
1M
3M
6M
9M
1Y
4.15
4.25
4.23
4.22
4.19
4.09
4.05
4.00
3.95
-4
5
-1
0
-1
-1
-1
0
-1
4.40
%
D a ily c ha nge
( bp)
3.20
T ER M
1x2
1x4
3x6
6x9
9x12
3x9
6X12
3.96
3.86
3.46
3.11
3.09
3.46
3.15
-1
0
-1
2
10
1
4
4.60
4.20
4.00
3.80
3.60
3.40
F R A ra t e s ( M id)
30 Dec
1 Jan
3 Jan
30 Dec
1 Jan
3 Jan
28 Dec
26 Dec
24 Dec
22 Dec
20 Dec
18 Dec
16 Dec
14 Dec
12 Dec
10 Dec
8 Dec
6 Dec
4 Dec
200
150
100
50
Czech Republic
Italy
28 Dec
26 Dec
24 Dec
22 Dec
20 Dec
18 Dec
0
16 Dec
8
0
-17
-27
-5
-4
-32
-5
--
14 Dec
2.44
0.45
4.60
9.91
3.59
2.82
4.96
3.02
--
250
12 Dec
V al ue
C hang e
(bp)
10 Dec
Sp r ead 10 Y *
Poland
So urce: Reuters
FRA 6X9
300
8 Dec
Po land
73.7
-3
Czech Republic
60.2
-3
Hungary
258.2
-7
Greece
37030.5
0
Spain
264.1
-7
Italy
247.3
-7
P o rtugal
389.1
-10
Ireland
201.3
-2
Germany
39.4
0
* 10Y treasury bo nds o ver 10Y B unds
FRA 3X6
CDS 5Y
350
6 Dec
V al ue
C hang e
(bp)
WIBOR
4 Dec
M e a s ure s o f f is c a l ris k
C o unt ry
C D S 5Y
3.00
Spain
Economic calendar
FORECAST
Time
CET
COUNTRY
3:45
CN
PMI – manufacturing
Dec
pts
14:00
PL
Inflation expectations
Dec
%YoY
INDICATOR
MARKET
BZWBK
ACTUAL
VALUE
LAST
VALUE*
-
-
51.5
50.5
3.4
3.8
PERIOD
Monday (31 December)
WEDNESDAY (2 January)
9:00
PL
PMI – manufacturing
Dec
pts
48.1
48.0
48.5
48.2
9:53
DE
PMI – manufacturing
Dec
pts
46.3
-
46.0
46.8
9:58
EZ
PMI – manufacturing
Dec
pts
46.3
-
46.1
46.2
14:00
PL
Current account
Q3
€m
-
-2 457
-3 367
-2 203
14:00
PL
Exports
Q3
€m
-
36 781
36 569
35 731
14:00
PL
Imports
Q3
€m
-
36 991
36 994
37 371
16:00
US
ISM – manufacturing
Dec
pts
50.2
50.7
49.5
11:00
PL
Bond auction
14:15
US
ADP report
Dec
k
133
-
215
148
14:30
US
Initial jobless claims
week
k
-
-
372
362
20:00
US
Minutes Fed
THURSDAY (3 January)
FRIDAY (4 January)
9:53
DE
PMI – services
Dec
pts
52.1
-
49.7
9:58
EZ
PMI – services
Dec
pts
47.8
-
46.7
11:00
EZ
Flash HICP
Dec
%YoY
2.1
-
2.2
14:30
US
Non-farm payrolls
Dec
k
150
-
146
14:30
US
Unemployment rate
Dec
%
7.7
-
7.7
16:00
US
ISM – services
Dec
pts
54.2
-
54.7
Source: BZ WBK, Bloomberg, Reuters
* in case of the revision, the data is updated
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