The Hungarian bonds gained further and the yields fell more than 10 bps across the curve. That sent the short end of the curve to one year lows. According to the reports in newspapers over the weekend the Hungarian government should send its proposal of reforms to international lenders by the middle of the week. If the government does not change underlying macroeconomic assumption of 1.6% GDP growth in 2013, the program will stay overly optimistic. Market now more realistically bets on growth around 1% in 2013 and European commission is right to warn that 2013 budget deficit could be almost double the 2.2% GDP target given unrealistic growth assumptions. On the other hand Hungary does not need IMF money immediately and can continue to be uncompromising negotiator.
In Poland, we expect this week final round of macro-figures crucial for the October NBP rate decision. Most important from that point of view is August industrial output. If it slows to around 1% growth, doves on the board should get strong enough to push through the cut as early as in October.