The Swiss franc gained about 23 per cent today against the Polish zloty. That should be good news for Polish manufacturers, but a few commentators have noted that it’s bad news for Polish mortgage borrowers who have loans either denominated in francs or indexed to the franc.
And it seems like there are a lot of them: 46 per cent of total home loans are tied to the franc. Bloomberg quotes a currency strategist saying that the weaker zloty “might fuel concerns about financial stability in Poland.” Read more
With the European Central Bank keeping everyone guessing on the prospect of Eurozone QE, uncertainties over exactly how Draghi will choose to act to curb the deflation risk building in the region are beginning to create a headache for non-Eurozone members such as Poland.
Whilst Poland’s economy has proved resilient to the downturn thus far, deflationary trends are creeping into the country putting central bankers under pressure to act decisively sooner rather than later. The key metric everyone is worried about is a dip in Poland’s annual rate of consumer price inflation to a negative 0.3 per cent. Read more
Both countries were seen as great early hopes for replicating the success of shale gas in the US: Poland for its geology and enthusiastic government; China for its apparently vast reserves and for, well being China and getting things done. Both countries, clearly, are motivated to improve their domestic supply and hence their energy independence.
Yet both are taking longer than expected to reach material amounts of shale gas production. The FT’s Leslie Hook last week reported that few believe China will meet its 2015 production target of 6.5bn cubic metres – a modest amount, equivalent to 2 per cent of the country’s total gas production. Read more
An interesting anomaly is popping up in the world of Eastern Europe, Middle East, and Africa (EEMEA) flows, note Bank of America Merrill Lynch on Friday:
Investors are puzzled by the lack of EEMEA FX appreciation in spite of G-10 central bank printing. Waiting for the flow may be like Waiting for Godot: you wait and wait, but he never comes. Global rebalancing, deleveraging and higher US rates are responsible for this, in our view. In sum, the flow trends are consistent with the poor performance of EEMEA FX—and insofar as they are unlikely to change, currencies are likely to remain weak. Read more
Need some help from the ghost of Fiscal Cliff future with regards to what happens if current unsustainable trajectories are unchanged?
It’s possible you need look no further than Europe. While the causes of the cliff are different, it’s still the sort of drop off that can teach a valuable lesson or two. Read more
The official rate in Poland is 4.75 per cent.
Yet, across the Polish high street a slew of so-called ‘para-banks’, regularly offer interest rates in excess of 8 per cent. Read more
Here’s an interesting factoid by way of Bartosz Pawlowski from BNP Paribas’ CEEMEA team — Eurozone yields aren’t the only ones being haunted by negativity.
As it turns out, euro-denominated non-eurozone debt is also treading perilously close to the zero mark. Read more
All eyes are on Poland as it hosts the Euro 2012 football championships, but as SocGen analysts have already pointed out, there’s more than just football at stake here.
The construction boom that accompanied the tournament’s preparations is believed to have been critical in supporting the Polish economy over the last few years. Read more
Just the sort of news to make Terry Wogan chortle (via BBC):
That, essentially, is what many Poles are currently asking themselves.
After all, Poland has been aboard the euro-adoption boat for a long while. Expectations for eurozone entry were so ingrained in the population they even managed to spawn a euro-denominated mortgage binge. Read more
Reuters is reporting that Poland’s central bank stepped into the spot market for the fourth time in less than three months on Wednesday to help support the zloty versus the euro, which was once again nearing levels last seen in 2009.
But the Bank’s intervention seems to be ever less detectable in terms of price trends: Read more
In the aftermath of Wednesday’s unexpected rate cut and liquidity measures from the SNB — all designed to weaken the Swiss franc – there was only one thought on many people’s minds.
Was this indeed the top for the Swiss franc? And if so, did that mean it was time to double up on perhaps the most controversial retail trade of all time in central and Eastern Europe? The Swiss-denominated mortgage or loan. (We need only to direct you to our own reader comments to give you a flavour of the sentiment.) Read more
The Swiss franc.
It has indeed often been cited as being as good as gold. Read more
Italian jitters, alas, have not dissipated on Thursday. The sovereign was forced to pay severely high yields (some at records) on the sale of nearly €3bn in new bonds, in what many described as a make-or-break test of investor confidence for the eurozone.
With that in mind, it’s about time we got our hands on the now traditional “who’s exposed to xxxx” figures. Read more
Here’s a story that seems to have sneaked past undetected last Friday (albeit understandably).
It’s the final ratification of the IMF’s New Borrowing Arrangements (NAB) deal, complete with fresh details of exactly who is participating and on what terms. Read more
This is ironic, Brazil.
That’s a Nomura chart showing the Brazilian government as the biggest ‘loser’ of the currency war. You know the war we’re talking about: Brazil was the first and loudest to declare it in 2010. Oops. Read more
The euro continued to decline against the yen and dollar on Tuesday ahead of Wednesday’s planned sale by Portugal of six-month bills and by Poland of two- year and five-year bonds, reports Bloomberg. Earlier, the FT reported the EU was set to launch a multibillion-euro bond to help fund the rescue effort for Ireland, in a key test of investor sentiment for Europe’s troubled sovereign debt markets. Bankers noted strong demand for the bonds from European, Asian and Middle Eastern investors before the official opening of order books expected on Tuesday. The EU will sell about €5bn ($6.7bn) in five-year debt, the first part of some €50bn in bonds to help the Irish bail-out over the next two years. While such issues are costly, notes FT Alphaville, the eurozone’s real problem is the asset itself.
Same sort of messages from Turkey, Poland and Norway: New orders were up 3.2 and 1.7 points, respectively. Norway was basically flat.
Not going to move the global needle but reassuring consistency. Read more
Here’s an interesting datapoint unearthed up by BNP Paribas’ emerging markets deak on Monday.
The Latvian interbank rate — Rigibor — is trading through Euribor for the first time in four years… Read more
The International Monetary Fund announced on Monday that it had enhanced and expanded its lending tools to encourage needy economies getting financial aid before crises developed. The enhanced credit lines are to focus on pre-qualified countries that do not immediately need an emergency loan, according to Reuters. Flexible credit lines, which are already in place with Mexico, Poland and Colombia, are to be extended by up to two years. A new credit line with additional policy requirements for economies with ‘moderate vulnerabilities’ is also to be created, says Bloomberg.
Adventures in debt management, Hungarian change-the-rules edition.
The Hungarian economic ministry made this odd little statement on Tuesday (translated from the Hungarian via Google, so be warned): Read more
Oh dear. It appears some European governments never learn.
News comes to us via Dow Jones on Friday of Poland’s extremely active participation in the interest-rate and FX derivative market as recently as 2009. According to the government, these were measures designed to minimise the country’s debt servicing costs that year. Read more
Here’s a somewhat surprising finding from BNP Paribas’ Bartosz Pawlowski.
A closer look at the adverse scenario assumptions made by the Committee of European Banking Supervisors (CEBS) for use in the European stress tests reveals one particular recession-defying European country high up in the sovereign haircut leagues. Read more
The Hungarian watchdog has moved to fine Deutsche Bank in connection with activities related to fx swap deals in 2008, reports FT Alphaville. The move is interesting not because it tries to assign culpability for unsophisticated individuals and institutions getting rinsed on fair and square arrangements that backfired as market dynamics changed. Rather, it’s the fact that it alleges that Deutsche Bank willfully attempted to trip the deals by selling an inordinate amount of forints into the market in October 2008. Read more
The Polish zloty suffered its sharpest fall in two months on Friday after the country’s central bank intervened to stem the currency’s recent rapid rise, the FT reports. The National Bank of Poland said it had sold the zloty and bought “a certain amount” of foreign currency. The action came as the central bank sought to rein in the appreciation of the zloty, which rose 6 per cent against the euro in the first three months of this year, its strongest quarterly rise in six years.
A new European central bank turned to currency intervention this week.
As the National Bank of Poland stated simply on its website on Friday: Read more
FT Alphaville featured a guest post at the end of March by BNP Paribas economist Shahin Vallee, who claimed the ECB had agreed secret currency swap lines with Poland and Hungary in October 2009.
When FT Alphaville asked the European central bank about the swap lines, a spokeswoman said simply: ‘no comment’. Read more
A curious — if bitter — row is developing in Poland over the country’s use of its $20.5bn IMF credit line, FT Alphaville writes. The finance ministry wants more of it, while the central bank most certainly doesn’t. Where next for Poland’s recovery? Read more
Sun, sea, sand and interest-rate derivatives.
So goes the sad tale of mortgage-swap victims in Fuertventura in the Canary Islands, according to a report by Spanish online newspaper ABC.es on Monday (via Google Translate, emphasis ours): Read more
Turns out, sovereigns are not the only public bodies with a love of currency swaps.
Bloomberg reported on Wednesday that Italian municipalities are increasingly under domestic pressure over their prevalent use of derivatives in the last few years. Read more