The Greek hope fuelled rally on the central European markets. The leader of the region remains the forint, which is about 1% stronger week-to-week. Nevertheless the Hungarian government needs to review problematic legislation to ensure the start of formal talks with IMF and EU on further financial aid.
In the Hungarian outlook the IMF agreement will evidently have a crucial role. On Friday the Hungarian government sent an answer for the European Commission to the controversial questions (independence of Central Bank, ombudsman for data protection, age limit for judges) so it would turn out in the next 2-3 weeks whether Hungary should face further challenges given by the Commission or they give green light to start negotiations. We suppose negotiations could last for 1-1.5 month so in a positive scenario an agreement could be reached till late Marc-mid April.
In the meantime Tuesday’s NBH announcement could be essential about the two-year refinancing credit facility for commercial banks which gives them the opportunity to finance their liabilities and bond portfolios by central bank funds at an average interest rate of the base rate – so without time premium. This could decrease interest rates paid on bonds as current interest rate difference between bond yields and interbank HUF swap rates is 100 to 150 basis points. In the week ahead, we should see further macro-figures from Poland. After mixed data from labor market (weak employment, strong wages) and solid industrial output, we are looking for a deceleration in the retail sales, which should be partly driven by lower food inflation. The Polish macro-picture continues to support our base scenario of stable interest rates over 2012.