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2020/01/16 / Erste Group Research

Contained supply versus inflation fears

Looking ahead to 2020 for the CEE bond market, conflicting forces are on the horizon. On the one hand, limited supply compared to 2020, good rating developments and prospects (apart from Romania) and favorable public debt-to-GDP developments are on the positive side. On the other hand, inflation went close to (Poland), or even above (Czech Republic) inflation tolerance bands, after previous similar episodes in Hungary and in Romania in recent years.

Our data shows that the amount of debt redemptions this year could be altogether lower than EUR 65bn, or less than 5% of the total GDP of the region, vs. more than EUR 76bn in 2019. This is mostly due to strong prefinancing (i.e. in Poland), planned restructuring in the holding structure last year (i.e. Hungary pursuing longer-dated retail securities), or lower issuance of T-bills as short-term rates went up (i.e. in Czechia). In Romania, the increase of the deficit already put pressure on gross financing needs last year. While investor demand for Romanian bonds was recently good, we have yet to see what the European Commission thinks about the fiscal outlook.

Hard currency issuance could remain modest in CEE. Hungary is unlikely to sell FX bonds in benchmark size, while Poland and Serbia also have strategic aims to issue mostly on the local market. While Slovenia already tested the market with a EUR 1.5bn 10Y issue, Croatia might push for the completion of an overwhelming part of gross financing needs by the end of 1H20, which could include Eurobond issuance in 2Q20.

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General information

AuthorErste Group Research
Product nameCEE Bond Market Report
Topic in focusFX, Macro/ Fixed income
Economy in focusCEE, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia
Currency in focusCroatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar
Sector in focus-


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