JUL-30-ERSTE GROUP-CEE Insigts-Fixed Income and Foreign Exchange

CEE Insights
Fixed Income and Foreign Exchange – 30 July 2010
Croatia: T-bill auction attracted solid interest
Czech Republic: CNB to keep rates on hold, new

prognosis more dovish
Hungary: Healthy demand at bond auctions after

IMF negotiation breakdown
Poland: Zloty returned to 4.0, on external factors
Romania: Likely cut in FX MMR at next monetary

policy meeting
Turkey: Inflation Report confirms central bank’s

dovish monetary stance
Ukraine: Approval of IMF loan followed by rating

upgrade
CEE Insights – http://www.erstegroup.com
Market outlook
Sentiment has improved somewhat since last week, with the firming EUR vs. the dollar resulting in strengthening of
CEE currencies by 1.5% w/w for the Czech koruna, Polish zloty and Hungarian forint. The Czech koruna finally
dropped below 25 vs. the euro, making it the best performing currency YTD. However, we do not see any
fundamental reasons for a stronger rate at this moment. Further strengthening could just bring a rate cut back on
the table. The Polish zloty is another story. While the PLN returned back to 4 vs. the euro, we still see space for
further strengthening to well below 4.0. However, the zloty should remain volatile, especially if the fiscal situation is
questioned (i.e. the sustainability of public debt below 55% of GDP and slippage in fiscal consolidation). CDS
narrowed by 10-30bp across the region w/w. Approval of a new USD 15bn loan program for Ukraine by the IMF
board triggered a rating upgrade of Ukraine’s sovereign rating by S&P (by one notch). The most watched events
this week were auctions of government securities in the region. The most import test was yesterday’s auction of
Hungarian T-bonds, where we saw solid demand (which is also the case for other countries, excepting Slovakia,
which is struggling with low demand in primary auctions). We expect yields to remain elevated in the short run.
Only Czech yields remain low, given the recent ambitious statements on fiscal consolidation and the plan to reduce
issuance on the local market. On Thursday, the Czech National Bank will decide on rates; we expect no change.
The Romanian central bank should keep rates unchanged on Wednesday, but a reduction of minimum reserve
requirements on FX liabilities (from 25% to 20%) is expected, which should inject about EUR 1.5bn in liquidity into
the market. This should have a positive impact on FX and support demand for government securities.
Rainer Singer (Co-Head CEE Macro/FI Research) rainer.singer@erstegroup.com

Juraj Kotian (Co-Head CEE Macro/FI Research) juraj.kotian@erstegroup.com
Juraj Kotian (Co-Head CEE Macro/FI Research) juraj.kotian@erstegroup.com

Rainer Singer (Co-Head CEE Macro/FI Research) rainer.singer@erstegroup.com
Spre ads v s. Eurola nd
Instrument Current w/w m/m ytd
curr ent - 1m 02/01/2010
EUR/CZK 2 4.77 1 .5% 3.9% 6.3%
3Y (yield/bp) 2.07 0 0 -19 113 1 51 63
Czech Republic
10Y (yield/bp) 3.82 -2 -29 -9 113 1 53 52
5Y CDS 94 -2 -9 0
EUR/HRK 7 .244 0 .0% -0.7% 0.4%
3Y (yie ld/bp) 5.51 5 25 -116 440 4 61 4 57
Croatia
10Y (yield/bp) 6.55 -3 11 383 3 89
5Y CDS 274 -28 -55 45
EUR/HUF 2 84.6 1 .4% 0.9% -5.2 %
3Y (yie ld/bp) 7.01 -26 -12 -29 607 6 44 5 67
Hungary
10Y (yield/bp) 7.24 -16 -49 -68 455 5 15 4 53
5Y CDS 327 -20 -12 101
EUR/PLN 4 .003 1 .6% 4.2% 2.5%
3Y (yie ld/bp) 4.88 -4 -10 -53 394 4 30 3 78
Poland
10Y (yield/bp) 5.90 3 -49 -39 321 3 36 2 90
5Y CDS 134 -5 -21 8
EUR/RON 4 .250 0 .4% 2.2% -0.4 %
Romania 5Y (yie ld/bp) 7.43 -9 -18 -273 574 6 15 7 73
5Y CDS 352 -20 -64 66
3Y (yie ld/bp) 2.22 0 -1 -87 111 1 59 1 47
Slovakia 10Y (yield/bp) 3.98 1 0 -43 127 1 42 1 13
5Y CDS 82 -4 -11 2
EUR/TRY 1.97 -0.9% -0.2% 8.9%
2Y (yie ld/bp) 8.29 7 -46 -77 558 8 15 7 73
Turkey
10Y (yield/bp) 8.97 15 -87 n.a. 639 7 26 n .a.
5Y CDS 164 -3 -31 -17
EUR/UAH 1 0.34 -1.9% -4.7% 11.5%
Ukraine 2Y (yie ld/bp) 13.3 -75 -175 -1175 1244 1448 2367
5Y CDS 515 -12 -122 -757
Source: Re uters, Blo omberg (+ means streng thening / - means easing of the e xchange rate)
Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 30 July 2010 Page 2
Positions
Values P/L (%) Target P/L (%)
# Position Date of opening Instruments
Entry Today Target curr. +carry p.a. flat p.a.
short 10CZGB CZ 5.0 10/25/19 PL 5.5 4/11/19 107.8/94.5 110.6 98 99/103.5
29 18/12/2009 -0.2% 0.1% -0.3% 24.6% 33.5%
long PLGB CZK/PLN 6.26 6.18 6.51
long 5YROGB RO 11.0 03/05/14 111.82 111.42 116.30
31 08/2/2010 -3.0% 1.7% 3.7% 11.2% 23.0%
short 6M Euribor RON/EUR 4.141 4.254 4.05
32 long CZ2Y IRS 10/3/2010 2Y CZ IRS 2.13 1.62 2.45 -0.51 - 0,00 32bp -
3M Wibid/ 3M Euribor 3.82/1.13

33 short EURPLN 20/5/2010 4.009 3.82 4.0% 4.5% 23% 9.7% 43.8%
EUR/PLN 4.17
Rationale at inception
29) We see the potential for narrowing of the spread between Czech and Polish government bond yields which, in
our view, is fundamentally unjustifiably high. Time horizon is 9 months and target P/L including carry is close to 30%.
31) Romanian government yields will continue to decrease in 2010 as the central bank is likely to extend the
monetary policy easing cycle, improving the liquidity in the market – our forecast for the end-2010 key rate currently
stands at 6%, while further cuts in RON minimum reserve requirements are not excluded.
32) Czech 2Y swap are too low given the expected development of the economy and the associated IR
development (we expect the average CNB repo rate at 2.2% in 2011 and continuing rise in 2012).
33) We believe that, in light of relatively better macro data, the zloty has already started to return to its long-term
appreciating trend. We think that current market turmoil provides a good opportunity to enter position long PLN,
short EUR.
Closed positions
# Recommendation opened clos ed P/L inc.carr y
1 long: PLGB10y / 4m Euribor 16/09/200 5 27/10/2005 -3 .0%
2 short: CZGB15y / 6m PRIBID 16/09/200 5 21/11/2005 6 .0%
5 long: SKK/CZK 09/11/200 5 20/01/2006 1 .9%
3 short EUR/SKK 29/09/200 5 07/02/2006 3 .5%
4 EUR/PLN options 21/10/200 5 28/07/2006 -2 .7%
6 SKK/CZK long 23/03/200 6 30/10/2006 2 .2%
7 FRA 9* 12 short 28/07/200 6 08/11/2006 8bp
8 long HUGB 5y 13/10/200 6 29/01/2006 5 .7%
9 short CZGB/ long GDBR 09/01/200 7 27/02/2007 1 .8%
10 long CZK/EUR 27/02/200 7 19/03/2007 2 .3%
11 short CZGB/ long PLGB 07/03/200 7 10/05/2007 5 .5%
14 long SKKFRA 9x12, short EURFRA 9 16/07/200 7 13/08/2007 30 bp
13 short EUR/CZK 07/06/200 7 14/09/2007 3 .0%
15 short EUR/RON 23/10/200 7 21/11/2007 -4 .9%
12 short EUR/SKK 04/06/200 7 04/12/2007 1 .6%
16 long USD/CZK 29/11/200 7 14/01/2008 -3 .1%
17 long 3y HUGB / 3m Pribor 05/12/200 7 08/02/2008 -6 .8%
20 short EUR/SKK 22/01/200 8 13/02/2008 2 .9%
19 long USD/CZK 21/01/200 8 18/02/2008 -3 .6%
18 short EURRON 31/12/200 8 28/02/2008 -0 .6%
21 Short USD/RON 02/04/200 8 10/04/2008 3 .9%
22 Buy EU RFRA, sell SKKFRA 04/04/200 8 18/04/2008 26bp
23 Long EUR/C ZK 29/04/200 8 19/06/2008 -3 .8%
24 short EUR/RON 05/08/200 8 14/10/2008 -4 .7%
25 short EUR/PLN 09/09/200 8 21/10/2008 -3% (stop-loss)
27 short GEGB/long CZGB 12/08/200 9 22/10/2009 4 .9%
28 long 4y HUGB / 6m Euribor 08/09/200 9 18/11/2009 7 .4%
26 short EUR/PLN 12/08/201 0 14/01/2010 5 .5%
30 Short EURCZK 0 5/01/2010 17/01/2010 3 .2%
To be included in the tr ading ide as mailing lis t, please, mail to
ra iner.singer @erstebank.at, s ubject: trading ideas
Question of the week

How big is the gap between the current exchange rate and its fundamental equilibrium level at this point in
time? Is the gap somewhat justified?
Currently, the Hungarian forint exchange rate can be said to be at a weaker level than the equilibrium, although it
is pretty difficult to say where the equilibrium is exactly. We believe, however, that a balanced current account, and,
last but not least, the still considerable interest rate differential would imply a firmer forint vs. the euro than the
current 280-285 level. Before the crisis, the equilibrium was believed to be 245-260. We do not think that this
remains the same, as the forint's equilibrium level should be weaker now, i.e. 270-275 vs. the euro. Due to the
increased risks tied to the breakdown of IMF negotiations, the forint could remain above 280 for the next few
weeks. In the autumn, however, we believe it should firm below this level.
Zoltan Arokszallasi, Erste Bank Hungary
We estimate the fundamentally justified value of the Czech crown at around 25 per EUR, so the current value is
somewhat stronger than that. This has, however, only been the case since Wednesday and is apparently due to
what we have talked about as a risk for the last six months – that the easing of risk aversion, combined with the
good prospects for the Czech economy and the new government, is translating into pressure on the crown to rise.
Fundamentally, we see crown at 24.60 by year-end, so this is a bit too early for that. We think that the crown will
not hold the gains over next few weeks, but will revert back to 25 before strengthening again.
Martin Lobotka, Ceska sporitelna
The Romanian leu is currently pretty much balanced compared to its equilibrium level, which is estimated at
around 4.2 per euro. One month ago, it diverged significantly from its equilibrium level and hit an all-time low,
trading shortly above 4.4 vs. the euro, after some austerity measures were rejected by the Constitutional Court.
Investor sentiment has improved ever since and the current 4.25 against the European single currency is more
linked to economic fundamentals.
Dumitru Dulgheru, Banca Comerciala Romana
In Ukraine, the current exchange rate vs. the USD is about 25% higher compared to our own estimate of the real
effective exchange rate (REER). This REER is based on GDP deflators of main trade partners and should bring the
trade balance to zero. The current stronger exchange rate is justified by the constant capital inflows and positive
sentiment among the population.
Maryan Zablotskyy, Erste Bank Ukraine
We estimate that the gap between the current exchange rate of the Turkish lira vs. the EUR and its fundamental
equilibrium level is around 6.5%. Given the expected capital inflows to Turkey, moreover, we do not expect this gap
to be justified unless the sentiment regarding Turkey deteriorates.
Ali Cakiroglu, Erste Securities Istanbul
Croatia conducts a tightly managed float and the exchange rate remains close to long-term average levels. As far
as the potential overvaluation of the HRK is concerned, the evidence is not that clear, although recent estimates
from the IMF suggest only a mild overvaluation (on average 5%).
Alen Kovac, Erste Bank Croatia
Major markets
Eurozone: The economic recovery could flatten in the months ahead in the Eurozone. German retail sales
Moderate declined by 0.9% m/m in June, compared to a strong increase in May (+3% m/m). Next week,
economic retail sales for the aggregated Eurozone will be released and we expect similar dynamics. Final
growth without demand is still not very robust, which should also be reflected in a moderate July inflation rate
any change in around 1.6-1.7%. Due to base effects and the more pronounced price erosion last year, producer
monetary policy prices for June could reach around 3%. Next week’s ECB meeting should bring no major
surprises. Given the economic and price development, we expect no change in interest rates.
2Q GDP slightly The US 2Q GDP growth declined to +2.4% q/q (annualized), compared to the revised first
weaker than quarter’s +3.7% (market expectations for Q2: +2.6%). This is the very first GDP estimate; this
market figure normally has to be revised. Personal consumption was weaker (+1.6% after +1.9% in
expectations Q1), which could be attributed partly to the weak labor market and the uncertainty about job
prospects. The Fed’s Bernanke said in his testimony that, ‘after two years of job losses, private
payrolls expanded at an average of about 100,000 per month during the fist half of this year, a
pace insufficient to reduce the unemployment rate materially.’ Next week, on Friday, the labor
market report will be published; it can be expected that the change in private payrolls will not
exceed 110,000. On Monday, the purchasing manager index ISM should point to a slowdown in
the economic recovery.
Gudrun Egger, Erste Group, gudrun.egger@erstegroup.com

Rainer Singer, Erste Group, rainer.singer@erstegroup.com
Forecasts
Intervention Rate 3m Money Market Rate 10y Govt. Yield FX

EUL USA EUL Fwd USA Fwd EUL USA EUR/USD Fwd
Spot 1.00 0 - 0.25 0.90 0.45 2.67 2.93 1.303
Sep-10 1.00 0 - 0.25 0.90 1.24 0.60 0.72 3.00 3.50 1.30 1.303
Dec-10 1.00 0.50 1.00 1.53 0.80 1.09 3.10 4.00 1.35 1.302
Mar-11 1.00 0.75 1.20 1.70 1.00 1.45 3.20 4.20 1.33 1.302
Jun-11 1.25 1.00 1.50 1.42 1.30 1.08 3.40 4.40 1.30 1.301
Croatia
Another solid June trade balance figures largely corresponded to our view, with exports maintaining the
export robust pace from May, posting 20% y/y growth. Imports remained largely stagnant on the
performance in annual level, falling 2%, although showing some stabilization and suggesting support for
June stabilization of domestic demand. Correspondingly, the trade balance deficit continued to
narrow in June, dropping 20%, still with a weaker export-import coverage ratio (53.2% vs. the
robust 64.1% seen in May). The export side has been boosted by intermediaries, transportation
equipment (shipbuilding) and consumer goods. The import side performance has been largely
balanced, with capital goods and transportation equipment remaining the strongest-hit
categories. Recapping the 2Q trade balance, exports showed a robust performance, up 18%
(vs. 5% in 1Q), while imports also stabilized, falling 2% (vs. 10% in 1Q). The export-import
coverage ratio improved a substantial 9.6pp in 2Q, suggesting strong net export support for
GDP in 2010. In the remainder of 2010, we see exports maintaining their overall solid
performance, albeit likely less robust than in 2Q, given the diminished recovery outlook. We see
further stabilization on the import side, although not producing a stronger effect on the trade
balance deficit, as we see domestic demand remaining largely constrained.
June retail The June retail trade -1.5% y/y flash estimate surprised on the positive side, outperforming both
trade down the consensus (-3.1% y/y) and our sub-consensus (-4.5% y/y) estimate. This was the lowest
1.5% y/y contraction of retail sales in the last 21 months, finally indicating stabilization of consumer
spending. Some support to the June figures could have come from the earlier start of sales
season, although detailed data should reveal more. With no labor market recovery underway
and with consumer sentiment and consumer credit remaining poor, we only expect further
stabilization in the remainder of 2010 and a low likelihood of a spending recovery.
T-bill auction The FX market brought no surprises this week, as the exchange rate remained stable a notch
attracted solid below 7.25, exhibiting limited volatility. The main event was the T-bill auction, as, after a two-
interest week break, the MoF returned to the short-term debt market, with auction results failing to bring
any significant surprise. Solid demand allowed for slightly higher than initially planned issuance,
also covering this week’s maturities. As far as yields are concerned, 3M and 6M rates remained
flat (at 2% and 3.30%, respectively), while 12M yields were down 10bp and 5bp, respectively,
on HRK- and EUR-linked papers (4.25% and 3.55%). Despite the recent hefty bond issuance
seen on the domestic market, investor demand remains fairly strong, allowing for relatively
comfortable short-term debt refinancing and suggesting a relatively stable yield performance.
Next week should likely see a lethargic summer mood, with no data releases scheduled and
markets not suggesting any more dramatic developments.
Alen Kovac, Erste Bank Croatia, akovac2@erstebank.com
Czech Republic
CZK and No important data was released in the Czech Republic this past week. The most important
bonds rising, events were thus the strengthening of the koruna (which hit a level not seen since October
Czech assets 2008, 24.60) and another fall of Czech government yields. The first of these events did not
again really have any driver except for outside players’ interest in the crown, following the fall of risk
outperforming aversion and the rise of the EUR against the dollar. The second event is pretty much due to the
region same thing. Having originally been triggered by Czech Minister of Finance Minister Kalousek’s
comments suggesting less local (and more foreign) issuance to come in 2H10, the recent
European-wide tightening of spreads is also visible here (the CZ-GB one contracted to 100bp,
from around 160bp a month ago). One can also add the Moody’s comment on the possibility of
an upgrade of the rating if the new government goes through with fiscal and reform plans. All in
all, the Czech 10Y can be had for 3.80%.
Regarding the crown, we do not think it will keep these gains. While we have long expected the
crown to strengthen to around 24.60 by year-end 2010, the current move is too fast and too
early. The CNB also will not exactly countenance this pace of strengthening. It is not dangerous
yet, but if one imagines three such days in a row, a cut would very likely be back on the table.
We still expect some nervousness to arise on the market (the data flow is not going to be as
good as during 2Q10; we are not over with debt problems in the developed world), which should
get the crown back to above 25. However, the overall trend remains clear – strengthening
towards 24.60 by year-end, with an average of 24.4 in 2011.
As for bonds, we switched to a neutral stance (from bearish) a couple of weeks ago, as the talk
of issuing more abroad and the new government skew the risks toward pricier bonds (despite
heavy financing needs in 2H10). All will depend on the split between local and foreign issuance
and between short-term (T-Bills) and long-term papers. This is hard to predict, given the
MinFin’s vague communication on the issue. If most of the remaining financing needs are
placed here and in long bonds, we believe that bonds will quickly rise back above 4%.
CNB to keep PMI and the repo rate are the most anticipated events next week. PMI for July will be watched
rates on hold, closely for signs of whether the cooling-off of the global recovery has already become apparent
new prognosis in the Czech economy. The repo rate should not change, remaining at an all-time low of 0.75%.
more dovish The board will be cautious about the recovery, the fiscal consolidation in the pipeline and the
recent strength of the koruna. They will remain in wait-and-see mode, while their new prognosis
should bring lower growth for 2011 and hence a lower IR trajectory. If it proves more dovish, the
crown may suffer and revert back to the fundamentally justified level of 25 per EUR.
Martin Lobotka, mlobotka@csas.cz
Hungary
Healthy This week, markets were closely watching the results of the bond auctions on Thursday, as the
demand at possibility of Hungary not being able to finance its debt and deficit via the markets after the
bond auctions breakdown of negotiations with the IMF became a concern. The good result at the auctions
after IMF should have eased these fears. The Hungarian Debt Management Agency placed HUF 57.5bn
negotiation (EUR 203mn) to investors, 15% more than originally planned. The forint also gained some
breakdown strength, mainly in the first half of the week. Later in the week, however, some weakening
occurred, but this can be attributed to international events and not domestic news. For the
coming week, we expect both yields and the forint to stay at roughly the same levels as those
seen today, but volatile trading can be expected.
Industrial This week, retail sales and unemployment figures were disclosed. The May retail sales figure
production disappointed to the downside with a 4.7% y/y decline, missing the market consensus (-3.7%)
growth to and our forecast (-3.4%). The April figure was -5.0%. The seasonally and working day-adjusted
return to monthly index declined 0.5%, vs. the 0.7% drop a month earlier. The recent figure shows that
single-digit the recovery of household consumption may not pick up as quickly as the upside surprises in
territory, trade the first few months may have suggested to some observers. Unemployment, however, was
balance may better than expected in the April-June period at 11.1%, beating our 11.3% forecast and the
continue to more bullish 11.2% market estimate. This improvement, however, is not unusual in these times
post surplus of the year. Altogether, the two figures suggest that household consumption may remain in the
red this year. We continue to expect a 1.5% yearly decline in households’ final consumption in
2010. Next week, industrial production and trade balance figures are expected to be disclosed.
Industry output could remain strong, but we expect the yearly index to have declined to below
10% in June (we forecast +8.5%). Consequently, factory orders from Germany are still healthy,
but the previous data there missed expectations slightly. As for the trade balance, the June
surplus could have been EUR 385mn, after the EUR 429mn figure in May. Until the year-end,
we expect the surpluses to decline, as import growth may continue to gain strength relative to
exports, as the slowly reviving household consumption could create some additional demand for
imports for the remainder of 2010.
Zoltan Arokszallasi, Erste Bank Hungary, zoltan.arokszallasi @erstebank.hu

Poland
Zloty returned This has been a calm week in Poland, with no data releases. The most interesting news
to 4.0, on concerned the zloty exchange rate. The improved market sentiment after the results of the
external stress tests supported the zloty, which returned to values around 4.0. The zloty has not been
factors that strong since mid-May. On both ends, the zloty remains driven mostly by external factors,
with domestic data playing a secondary role. We remain positive on the zloty. With receding risk
aversion, investors should recognize the stronger fundamentals of the Polish economy and the
zloty should return to its long-term convergence trend. In the short term, however, persisting
uncertainties and continued debt worries will likely affect the zloty and therefore episodes of
high volatility can still be expected. At the end of this year, we expect the zloty at 3.7. Next
week’s calendar is also empty.
Poland’s PAP newswire reported an unofficial draft of the four-year financial plan. The Finance
Ministry allegedly proposed cutting the public finance deficit to 3% of GDP in 2013, a year later
than the government has pledged. Next year’s deficit should remain roughly at this year’s level,
which is not good news for markets. There is also a risk that rating agencies may release
negative comments if this plan is confirmed. The zloty’s strengthening may be hindered in such
circumstances.
Lubos Mokras, Ceska sporitelna, lmokras@csas.cz
Romania
Likely cut in FX Our base scenario for the next monetary policy meeting on Wednesday is consistent with a flat
MMR at next key rate at 6.25% and a 5pp cut in FX minimum reserve requirements to 20%. This should
monetary release around EUR 1.5bn into the market and is positive news for the FX market. At the same
policy meeting time, it opens the door for further issuances of EUR-denominated government securities on the
local market and enables the MinFin to cover the budget deficit at lower costs. Part of the
additional liquidity could be used by banks to support investment loans for corporate clients with
export activities and also for mortgage loans on the retail side. Exports are currently a key factor
that lessen the extent of the economic decline and private companies in the manufacturing area
took full advantage of high external orders from Eurozone countries. The hike in VAT to 24%
beginning with July will translate immediately into the inflation rate and the NBR is determined
to offset the second round effects of this increase in the taxation level on the consumer prices.
Around 91% of the goods and services that compose the consumer basket used by the National
Institute of Statistics to calculate the monthly inflation rate will see their corresponding VAT
increased from 19% to 24%. The balance is represented by goods and services with a reduced
VAT quota that remains unchanged. Some retailers have already announced they will support
the VAT increase instead of passing it on to consumers via higher prices. This is a strategy to
acquire more clients in the midst of the contraction of household consumption determined by
the ambitious fiscal consolidation program followed by the government and a still fragile
recovery of the private segment of the economy. The stability of the RON and a good
agricultural harvest could also reduce the inflationary pressures in the next few months.
Considering all of these aspects, the NBR should maintain the key rate flat at 6.25% throughout
the rest of 2010.
1H10 budget At the end of June, the budget deficit (cash standards) stood at RON 18.1bn, or the equivalent
deficit meets of 3.4% of GDP, slightly below the ceiling agreed with the IMF (RON 18.2bn). Public revenues
target agreed limited their annual fall to 0.1%, while expenditures increased by 4%. The development is
with IMF encouraging, as June was the last month before the introduction of important measures aimed
to consolidate public finances – a 25% cut in public wages, a 15% cut in some social
allowances and a 5pp increase in VAT to 24% beginning with July 1. The flipside of this
performance is the building up of domestic arrears, which limit the capacity of private
companies to start new investment projects and create new jobs. Since the beginning of the
stand-by arrangement with the IMF, the government has constantly missed the target on
domestic payment arrears and requested waivers on the occasion of each review of the IMF
program. According to the stand-by arrangement with the IMF, the stock of domestic arrears
has to be cleared by April 2011. At the general government level, more spending will be
allocated in the budget this year to clear health arrears and a restructuring plan is underway to
contain arrears growth in the future. At the local government level, the government plans to use
swap agreements to clear mutual debts between local authorities and public enterprises. The
swap arrangement would involve mutually cancelling overdue tax obligations of public
enterprises with arrears owed to those enterprises by the general government. In recent
months, the authorities have made progress in reducing arrears in VAT refund payments to
exporters.
Talks between the Romanian authorities and the IMF for another review of the stand-by
arrangement are currently underway in Bucharest and the Fund expressed its concern about
the low rate of EU fund absorption. It will soon begin to work together with the government to
improve the situation. According to the most recent data, the absorption degree of the structural
European funds is around 10%. Unlike the previous review of the stand-by arrangement from
the end of April, which focused mainly on fiscal consolidation measures, the present talks tackle
the problem of restoring economic growth and increasing the competitiveness of the Romanian
economy after emerging from the recession. We remain optimistic about a positive outcome of
the review, which should lead to the disbursement of EUR 0.9bn to the NBR. As a result, the
RON should appreciate to 4.23 by September.
MinFin This week, the MinFin sold 1Y EUR-denominated T-bills worth EUR 1.2bn on the local market at
borrows EUR 4.9%. The initial plans of the MinFin were consistent with a total issuance of only EUR 400mn.
1.2bn from Investors placed total bids worth EUR 1.4bn. This comes after the recent decisions of the officials to
local market in reject bids above 7% at auctions for RON-denominated bonds and bills. As a result, the total
1Y T-bills issuance of RON-denominated government paper was significantly lower than the planned amount
during the last three months and this raised some questions about the financing of the budget deficit
in the near future. One month ago, the minister of finance said that the Treasury is not desperate to
sell debt, because it still has sufficient funds and is determined to fight investors that ask for high
yields. We maintain our forecast of 5Y government yields at 7.7% in December.
Eugen Sinca, BCR, eugen.sinca@bcr.ro
Turkey
Inflation This week’s major release was the central bank’s third period Inflation Report. In line with our
Report expectations, the bank revised its 2010 inflation forecast significantly downwards, from 8.4% to
confirms 7.5%. The downward revision for the 2011 inflation forecast was only 0.1pp, which pulled it
central bank’s down to 5.3%. Moreover, the bank revised its baseline scenario to limited rate hikes in 2011,
dovish with policy rates staying at single-digit levels during the forecast horizon (2010-12). Previously,
monetary the bank was planning to start a gradual tightening in the last quarter of this year. The Inflation
stance Report is pretty much in line with our expectations. The CBT seems determined to keep its
policy rates at low levels for as long as possible. Moreover, given the (even more) dovish
monetary policy stance of the CBT and our expectation of a sharp slowdown in economic
activity in the remainder of the year, we think that the bank will likely keep the policy rates on
hold until mid-2011. We expect cumulative 75-100bp rate hikes in 2011. Note that, below the
CBT’s 7.5% inflation target, we expect CPI inflation to come in at 7.0% at end-2010.
Nevertheless, we remain skeptical regarding the 2011 5.3% forecast, as we believe that there
might be some fiscal loosening ahead of the general elections (to be held in July 2011), which
in turn might deteriorate the inflation outlook. For 2011, we work with an inflation forecast of
6.8%.
Capacity Capacity utilization in the manufacturing sector came in at 74.7%, posting 1.1pp m/m and 7.3pp
utilization y/y increases, respectively. This was much better than both the 73.1% market consensus and
came in at high our above-consensus estimate of 73.8%. The seasonally and working day-adjusted capacity
end of utilization, however, turned out flat in m/m terms in July (at 72.4%), suggesting that the increase
expectations in capacity utilization is mainly driven by the low base of the previous year. The higher than
expected figure is mainly attributable to the increase in the capacity utilization of capital goods
and to some extent of intermediate goods. The former increased by 1.8pp to 70% and the latter
rose by 0.9pp to 78.2%. Going forward, we expect the pace of the recovery in capacity
utilization to lose momentum in 2H10, given that the favorable base effect will start to die out,
albeit gradually. We see capacity utilization hovering around 75% during the remainder of the
CBT increased year, which in turn implies weaker IP growth rates.
reserve
requirement In line with the previously announced exit strategy, the CBT increased the FX required reserve
ratio for FX ratio by 0.5 percentage points to 10.0%. The bank also announced that the aforementioned
deposits by 0.5 increase would reduce the market FX liquidity by around USD 720mn. Note that, in its press
percentage release of April 14 on monetary policy exit strategies, the CBT stated that they would draw
points down the measures related to FX liquidity to pre-crisis levels gradually, once the normalization
in the global markets becomes more pronounced. Therefore, the CBT’s move of increasing the
FX required reserve ratio should be perceived as compatible with its exit strategy.
Foreign trade The foreign trade deficit came in on the low end of expectations, at USD 5.6bn, in June. This
deficit at low was lower than the USD 5.9bn market consensus and our above-consensus USD 6.3bn
end of estimate. On a YTD basis, the trade deficit jumped to USD 28.5bn, compared to the USD
expectations in 14.6bn registered in the same period of the previous year. We see exports and imports reaching
June USD 117.0bn and USD 176.0bn by end-2010, hence bringing the foreign trade deficit figure up
to USD 59bn, from USD 38.7bn at end-2009. Moreover, we believe that the widening in the
foreign trade deficit will likely result in a sharp increase in the current account deficit. That said,
we expect the current account deficit to rise to USD 30.7bn (or 4.3% of the expected GDP) by
the end of 2010, from USD 13.9bn (or 2.3% of the GDP) at end-2009.
Treasury The Treasury will disclose the August borrowing strategy today after the market close.
borrowing According to the preliminary announcement, the Treasury has a total redemption of TRY
strategy for 18.9bn, of which TRY 17.2bn will be to the markets. The heaviest redemption to the markets will
August due out be executed on August 18, with TRY 18.0bn. Although the CBT’s dovish monetary policy stance
today supports the current levels, we believe that we might witness a relative increase in bond yields.
We see benchmark bond yields rising slightly to around 8.45% in August.
Only release Turkstat will disclose July’s CPI and PPI figures on Tuesday at 9:00 CET. The market
next week will consensus for July’s CPI inflation stands at a negative figure of 0.31% m/m, while our estimate
be July CPI favors a decline to the tune of 0.2% m/m. We believe that the clothing component will be the
and PPI main driver of July’s inflation, by recording 6-7% m/m decline, due to seasonal discounts. Other
inflation than that, we believe that major boosters of the headline inflation will be the education and
figures entertainment and culture components. If our estimation proves correct, annual inflation will
come down to 7.9%, from 8.4% one month ago. Meanwhile, the market consensus for PPI is -
0.05%, which, if realized, would bring the annual PPI inflation up to 8.4% in July, from 7.6% in
June.
Ali Cakiroglu, Erste Securities Istanbul, ali.cakiroglu@erstegroup.com
Ukraine
Approval of On July 28, the Executive Board of the International Monetary Fund approved a 29-month SDR
IMF loan 10bn (USD 15.2bn) Stand-By Arrangement for Ukraine. An initial disbursement equivalent to
followed by SDR 1.25bn (USD 1.9bn) is available immediately. With it, the IMF Board has canceled the old
rating upgrade SDR 11bn (USD 17bn) loan program from which Ukraine already withdrew USD 11bn. The next
program revision will be conducted in October-November this year. S&P upgraded Ukraine's
foreign currency long-term rating by one notch to B+ following the IMF loan announcement.
S&P now has the highest rating for Ukraine among the top three agencies, as Fitch maintains
its B rating and Moody's has had B2 for more than a year now. The IMF-Ukraine program is
aimed to ensure fiscal stability, energy sector reforms, strengthening of the financial sector and
modernizing central bank monetary policies. We do not expect Ukraine to experience any
disagreements with the IMF in the near future on executing program targets, as happened in the
past. The government has already shown that it can make some unpopular austerity decisions,
like cutting budget expenditures and increasing utility prices. The news is definitely not a
surprise, given the initial IMF-staff level agreement. However, the unexpected S&P rating
upgrade should favor a further decline in sovereign yields.
Maryan Zablotskyy, Maryan.Zablotskyy@erstebank.ua
Capital markets forecasts

Exchange Rate vs EU R
CZK Fwd HRK Fwd HUF Fwd PLN Fwd RON Fwd TRY Fwd UAH Fwd
Spot 24 .8 7.25 284.4 4.00 4 .25 1.97 10.30
Sep-10 25 .2 24 .8 7.28 7.28 280.0 286.3 3.85 4.01 4 .23 4 .37 2.00 1.99 10.80 10.43
Dec-10 24 .7 24 .8 7.30 7.30 270.0 288.9 3.70 4.04 4 .22 4 .44 2.07 2.02 11.04 10.60
Mar-11 24 .6 24 .8 7.30 7.30 265.0 291.3 3.60 4.06 4 .20 4 .50 2.05 2.04 10.64 10.79
Jun-11 24 .4 24 .8 7.25 7.25 262.0 293.5 3.57 4.08 4 .15 4 .56 2.02 2.08 10.40 10.95
Inte rvention Rate 3M Money Mar ket Rate

CZ HR HU PL RO TR UA CZ Fwd HU Fwd PL Fwd RO Fwd TR Fwd UA
Spot 0.75 6.00 5.2 5 3.50 6.25 7.0 0 8 .50 1.22 5.32 3.82 6.90 7.5 2.95
Sep-10 0.75 6.00 5.2 5 3.75 6.25 7.0 0 8 .50 1.15 1.25 5.25 5.73 4.00 3.88 7.60 7.83 7.50 8.42 3.00
Dec -10 1.00 6.00 5.2 5 4.00 6.25 7.0 0 8 .50 1.25 1.22 5.20 6.03 4.10 4.08 7.80 6.76 7.50 8.98 3.00
Mar-11 1.00 6.00 5.2 5 4.00 6.00 7.0 0 8 .00 1.25 1.25 5.20 6.20 4.20 4.23 7.50 6.44 7.60 8.73 4.00
Jun-11 1.25 6.00 5.2 5 4.25 6.00 7.0 0 8 .00 1.33 1.79 5.20 6.25 4.20 4.37 7.30 5.53 7.60 8.68 4.00
10 y Govt. Yield 5 y Govt. Yie ld 2y Govt. Yield 2y Govt. Yield

CZ HR HU PL SK RO TR UA
Spot 3.82 6.55 7.22 5.84 3.98 7.46 8.3 2 12 .5
Sep-10 4.25 6.20 7.30 5.60 4.50 7.50 8.6 0 14 .0
Dec-10 4.15 6.10 7.10 5.65 4.80 7.70 9.0 0 13 .0
Mar-11 4.10 6.00 6.70 5.70 4.90 7.40 9.4 0 12 .0
Jun-11 4.00 6.00 6.30 5.70 5.00 7.10 9.6 0 11 .0
Long-term forecasts
Rea l GDP growth (%) 200 8 2009f 2010f 2011f CPI (%), eoy 2008 2009 f 2010f 20 11f
Croatia 2.4 -5 .8 -1.5 1.5 Cro atia 2 .9 1.9 3.8 3.0
Czech Republic 2.3 -4 .0 1.8 1.7 Cze ch Repu blic 3 .6 1.0 2.1 2.4
Hun gary 0.6 -6 .3 0.9 3.1 Hunga ry 3 .5 5.6 3.6 3.2
Pola nd 4.9 1.8 2.5 3.3 Poland 3 .3 3.5 2.4 3.2
Romania 7.3 -7 .1 -3.0 1.2 Romania 6 .3 4.7 8.5 4.3
Serbia 5.4 -3 .0 1.3 3.1 Serbia 8 .6 7.7 4.9 5.3
Slovakia 6.2 -4 .7 3.1 4.0 Slovakia 4 .4 0.5 2.0 4.0
Turkey 0.7 -4 .7 4.8 5.1 Turkey 10.1 6.5 7.0 6.8
Ukraine 2.1 -15.1 3.3 4.5 Ukraine 22.3 13.0 12.5 9.0
CEE8 average 4.1 -3 .7 1.4 2.8 CEE8 a ver age 5 .8 4.2 4.3 3.9
CEE8+Turk ey 2.7 -4 .1 2.8 3.8 CEE8+Tur key 7 .5 5.2 5.4 5.1
Unemployme nt (%) 200 8 2009f 2010f 2011f 3M rates (average, %) 2008 2009 f 2010f 20 11f
Croatia 8.4 9.1 10.7 10.4 Cro atia 7 .0 8.9 2.7 4.0
Czech Republic 5.4 8.1 9.1 9.2 Cze ch Repu blic 4 .0 2.2 1.3 1.5
Hun gary 7.8 10.0 10.9 10.0 Hunga ry 8 .9 8.6 5.4 4.8
Pola nd 10.0 11.0 12.7 10.8 Poland 6 .3 4.3 4.1 5.1
Romania 5.8 6.9 8.4 8.2 Romania 13.0 11.7 6.9 6.3
Serbia 13.7 16.1 18.5 18.0 Serbia 15.6 14.4 9.0 8.5
Slovakia 9.6 12.1 14.3 13.5 Slovakia 4 .2 1.2 0.8 1.6
Turkey 11.0 14.0 13.1 12.7 Turkey 17.4 9.9 7.5 8.3
Ukraine 6.4 8.8 8.6 8.3 Ukraine 14.8 18.0 9.5 7.0
CEE8 average 8.2 9.9 11.2 10.3 CEE8 a ver age 8 .1 7.0 4.5 4.6
CEE8+Turk ey 9.3 11.6 12.0 11.3 CEE8+Tur key 11.9 8.2 5.8 6.2
C/A (%GDP) 200 8 2009f 2010f 2011f Budge t Balance (%GDP) 2008 2009 f 2010f 20 11f
Croatia -9.2 -5 .4 -3.5 -3.9 Cro atia -1.6 -3.1 -4.7 -3.8
Czech Republic -3.1 -1 .0 -0.7 -1.3 Cze ch Repu blic -2.1 -5.3 -5.3 -3.9
Hun gary -7.1 0.2 -0.4 -1.1 Hunga ry -3.8 -4.0 -4.2 -3.6
Pola nd -5.0 -1 .6 -3.1 -4.8 Poland -2.2 -6.9 -6.2 -4.8
Romania -1 1.6 -4 .5 -4.8 -5.5 Romania -5.4 -8.3 -7.8 -6.5
Serbia -1 8.2 -5 .7 -7.3 -7.7 Serbia -2.5 -4.0 -4.8 -3.5
Slovakia -6.5 -3 .2 -2.3 -2.8 Slovakia -2.3 -6.8 -7.5 -6.0
Turkey -5.7 -2 .3 -4.4 -4.5 Turkey -1.8 -5.5 -4.2 -3.3
Ukraine -6.7 -1 .7 0.0 0.0 Ukraine -1.2 -6.3 -5.5 -4.0
CEE8 average -6.7 -2 .2 -2.5 -3.4 CEE8 a ver age -2.7 -6.2 -6.0 -4.7
CEE8+Turk ey -6.3 -2 .2 -3.3 -3.9 CEE8+Tur key -2.3 -5.9 -5.3 -4.1
Looking ahead
Country Date Release/e vent/figures Our expectation Consensus* Prior
Czech Republic 5-Aug CNB Rate-Setting meeting, % 0.75 0.75
Cr oatia No data releases scheduled
Hungar y 5-Aug Industrial output (June , prelim., y/y) 8.5% n.a. 13.7%
6-Aug Trade b ala nce (Ju ne, EUR mn) 385.0 n.a. 42 3.6
Poland No data releases scheduled
Romania 3-Aug IPPI - Jun e (y/y) 6.20% - 6.50%
4-Aug Retail sale - June (y/y, s.a.) - - -3.40%
4-Aug CB Sup ervisory Meeting - key rate 6.25 6.25 6.25
Slovakia 4-Aug Ju ne retail sales y/y -1.7 - -3 .1
Turkey 3-Aug CPI Inflation, July -0.2% -0 .3% -0.6%
3-Aug PPI In flation, July - -0 .1% -0.5%
Ukr aine No data releases scheduled
*Sou rces: Bloomberg, Reuters
Auction diary
Country Auction-date Pay-date Maturity Cupon Offer Forec ast
Czech Republic 4 -Aug 9-Au g Sep-16-20 13 C ZK 7bn CZK 15b n
5 -Aug 6-Au g Feb-04-201 1 C ZK 8bn CZK 12b n
Hungar y 3 -Aug 11-Aug 10-Nov-1 0 HUF 4 5bn 5.50%
5 -Aug 11-Aug 27-Jul-11 HUF 5 0bn 5.65%
Poland no auction scheduled
Romania 2 -Aug 4-Aug-10 3-Aug-11 - RON 800m 7.0%
5 -Aug 9-Aug-10 25-Jul-13 6.25% EUR 300m 7.0%
Slovakia no auction scheduled
Turkey no auction scheduled
Ukr aine No auction scheduled
Exchange rates and interest rates (52 weeks)

300 Hungary 9.0 4.5 Poland 4.3
280 8.0 4.2
4.0
260 7.0 4.1
240 3.5 4.0
6.0
220
5.0 3.9
200 3.0
4.0 3.8
180
2.5 3.7
3.0
160
PLN/EUR 3.6
140 HUF/EUR 2.0 2.0 PLN/USD
HUF/USD 3.5
120 1.0 3m interbank rate, r.s.
3m interbank rate, r.s.
1.5 3.4
100 0.0
Jul Aug Sep Oct Dec Jan Feb Mar Apr May Jun Jul
8.0 Croatia
28 Czech Republic 2.50
7.5
26
24 2.00 7.0
22 6.5
1.50
20 6.0
18 5.5
1.00
16
5.0
14 CZK/EUR
0.50
4.5 HRK/EUR
CZK/USD
12 HRK/USD
4.0
10 0.00
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
13.0 Ukraine 40
5.0 Romania 12.0
12.0 35
4.5 10.0 11.0
30
10.0
4.0 8.0 25
9.0
20
3.5 6.0 8.0
15
7.0
3.0 4.0
6.0 UAH/EUR 10
RON/EUR UAH/USD
2.5 2.0 5.0 5
RON/USD 3m interbank rate, r.s.
3m interbank rate, r.s. 4.0 0
2.0 0.0
Jul Aug Oct Nov Dec Jan Feb Mar Apr May Jun Jul
2.4 Turkey 9.0

8.5
2.2
8.0
2.0 7.5
7.0
1.8
6.5
1.6
6.0
1.4 5.5
TRY/EUR 5.0
1.2 TRY/USD
4.5
1.0 4.0
Source: Bloomberg
Benchmarks
4.5 Czech Republic 1.2 8.0 Hungary 7.0
4 7.0
1 6.0
3.5
6.0
5.0
3 0.8
5.0
2.5 4.0
0.6 4.0
2
3.0
3.0
1.5 0.4
2.0
1 2.0
0.2
0.5 1.0 1.0
0 0 0.0 0.0
3m 1yr 3yr 5yr 10yr 3m 1yr 3yr 5yr 10yr
Spread to Euroland, r.s. Yields Spread to Euroland, r.s. Yields
7.0 4.5 4.5 2.0

Poland Slovakia
4.0 1.8
4.0
6.0
3.5 1.6
3.5
5.0 1.4
3.0
3.0
1.2
4.0 2.5
2.5 1.0
2.0
3.0 2.0 0.8
1.5
1.5 0.6
2.0 1.0
1.0 0.4
1.0 0.5 0.2
0.5
0.0 0.0
0.0 0.0
3m 1yr 3yr 6yr 9yr
3m 1yr 3yr 5yr 10yr
Spread to Euroland, r.s. Yields Spread to Euroland, r.s. Yields
10.0 Turkey 8.0

9.0
7.0
8.0
6.0
7.0
6.0 5.0
5.0 4.0
4.0 3.0
3.0
2.0
2.0
1.0 1.0
0.0 0.0
3m 1yr 2yr 5yr 10yr
Spread to Euroland, r.s. Yields
Contacts
Group Research
Head of Group Research
Friedrich Mostböck, CEFA +43 (0)5 0100 - 11902 Research Turkey
CEE Equity Research Head: Erkin Sahinoz (Fixed Income) +90 212 371 2540
Co-Head: Günther Artner, CFA +43 (0)5 0100 - 11523 Ali Cakiroglu (Fixed Income) +90 212 371 2536
Co-Head: Henning Eßkuchen +43 (0)5 0100 - 19634 Sadrettin Bagci (Equity) +90 212 371 2537
Günter Hohberger (Banks) +43 (0)5 0100 - 17354 Can Oztoprak (Equity) +90 212 371 2539
Franz Hörl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Research, Slovakia
Gernot Jany, CFA (Banks, Real Estate) +43 (0)5 0100 - 11903 Head: Juraj Barta, CFA (Fixed income) +421 2 4862 4166
Daniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Michal Musak (Fixed income) +421 2 4862 4512
Christoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Maria Valachyova (Fixed income) +421 2 4862 4185
Thomas Unger; CFA (Oil&Gas) +43 (0)5 0100 - 17344 Research, Ukraine
Vera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Head: Victor Stefanyshyn (Fixed Income) +38 044 593 - 1784
Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Svitlana Bazilevich (Equity) +38 044 593 - 9286
Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Maryan Zablotskyy (Fixed income) +38 044 593 - 9188
International Equities Fixed Income & Credit Institutional Sales
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Stephan Lingnau (Europe) +43 (0)5 0100 - 16574 Head: Jaromir Malak +43 (0)50100 - 84254
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Macro/Fixed Income Research Head: Thomas Almen +43 (0)50100 - 84323
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Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Martina Fux +43 (0)50100 - 84113
Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183 Michael Konczer +43 (0)50100 - 84121
Carmen Riefler-Kowarsch (Corporates) +43 (0)5 0100 - 19632 Margit Hraschek +43 (0)50100 - 84117
Rainer Singer (US) +43 (0)5 0100 - 11185 Institutional Sales Germany
Elena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Head: Ingo Lusch +43 (0)50100 - 84111
Macro/Fixed Income Research CEE Michael Schmotz +43 (0)50100 - 84114
Co-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Institutional Sales London
Co-Head CEE: Rainer Singer (Macro/FI) +43 (0)5 0100 – 11185 Antony Brown +44 20 7623 - 4159
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Brett Aarons +420 233 005 904 Simone Pilz +44 20 7263 - 4159
Research, Croatia/Serbia Institutional Sales Slovakia
Head: Mladen Dodig +381 11 22 00 866 Head: Peter Kniz +421 2 4862-5624
Alen Kovac (Fixed income) +385 62 37 1383 Sarlota Sipulova +421 2 4862-5629
Anela Tomic (Fixed income) +385 62 37 2295 Institutional Sales Czech Republic
Davor Spoljar (Equity) +385 62 37 2825 Head: Ondrej Cech +420 2 2499 - 5577
Research, Czech Republic Pavel Zdichynec +420 2 2499 - 5590
Head: David Navratil (Fixed income) +420 224 995 439 Milan Bartos +420 2 2499 - 5562
Petr Bartek (Equity) +420 224 995 227 Radek Chupik +420 2 2499 - 5565
Vaclav Kminek (Media) +420 224 995 289 Institutional Sales Croatia, Hungary, Romania
Jana Krajcova (Fixed income) +420 224 995 232 Head: Jaromir Malak +43 (0)501 00 - 84254
Radim Kramule (Oil&Gas) +420 224 995 213 Institutional Sales Croatia
Martin Lobotka (Fixed income) +420 224 995 192 Natalija Petljak +385 (0)6237 - 1638
Lubos Mokras (Fixed income) +420 224 995 456 Institutional Sales Hungary
Research, Hungary Istvan Kovacs +36 1 235 – 5846
Head: József Miró (Equity) +361 235-5131 Norbert Siklosi +36 1 235 - 5842
Bernadett Papp (Equity) +361 235-5135 Institutional Sales Romania
Gergely Gabler (Equity) +361 253-5133 Ruxandra Carlan +40 21 310-4449-612
Zoltan Arokszallasi (Fixed income) +361 373-2830 Ciprian Mitu +43 (0)50100 - 84253
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Piotr Lopaciuk (Equity) +48 22 330 6252 Darko Horvatin +43 (0)50100 - 84259
Marek Czachor (Equity) +48 22 330 6254 Ciprian Mitu +43 (0)50100 - 84253
Bianka Madej (Equity) +48 22 330 6260
Research, Romania
Head: Lucian Claudiu Anghel +40 21 312 6773
Mihai Caruntu (Equity) +40 21 311 27 54
Dumitru Dulgheru (Fixed income) +40 21 312 6773 1028
Cristian Mladin (Fixed income) +40 21312 6773 1028
Eugen Sinca (Fixed income) +40 21312 6773 1028
Raluca Ungureanu (Equity) +40 21311 2754
Treasury - Erste Bank Vienna

Saving Banks & Sales Retail
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CEE Insights

Fixed Income and Foreign Exchange – 30 July 2010

Croatia: T-bill auction attracted solid interest

Czech Republic: CNB to keep rates on hold, new

Hungary: Healthy demand at bond auctions after

Poland: Zloty returned to 4.0, on external factors

Romania: Likely cut in FX MMR at next monetary

Turkey: Inflation Report confirms central bank’s

Ukraine: Approval of IMF loan followed by rating

Rainer Singer (Co-Head CEE Macro/FI Research) rainer.singer@erstegroup.com

Juraj Kotian (Co-Head CEE Macro/FI Research) juraj.kotian@erstegroup.com

3M Wibid/ 3M Euribor 3.82/1.13

Question of the week

Gudrun Egger, Erste Group, gudrun.egger@erstegroup.com

Intervention Rate 3m Money Market Rate 10y Govt. Yield FX

Alen Kovac, Erste Bank Croatia, akovac2@erstebank.com

Martin Lobotka, mlobotka@csas.cz

Zoltan Arokszallasi, Erste Bank Hungary, zoltan.arokszallasi @erstebank.hu

Eugen Sinca, BCR, eugen.sinca@bcr.ro

Maryan Zablotskyy, Maryan.Zablotskyy@erstebank.ua

Capital markets forecasts

Inte rvention Rate 3M Money Mar ket Rate

10 y Govt. Yield 5 y Govt. Yie ld 2y Govt. Yield 2y Govt. Yield

Exchange rates and interest rates (52 weeks)

2.4 Turkey 9.0

7.0 4.5 4.5 2.0

10.0 Turkey 8.0

Spread to Euroland, r.s. Yields

Treasury - Erste Bank Vienna

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