At the upcoming SLOVGB auctions on Monday 15 April, four SLOVGB lines will be reopened, three of them for the first time. The cumulative issuance volume is set at EUR 500 mn. We expect healthy demand at the auctions, which could bring ARDAL's funding progress to ~79% of the full year SLOVGB gross issuance target. It remains to be seen how a possible CHF multi-tranche transaction will affect the official issuance plan for the rest of the year. Finally, it will be interesting to hear how the rating agencies will assess the government's latest fiscal consolidation plans, which were recently announced after the presidential elections but do not envisage the start of consolidation until 2025. |
In this quarterly asset allocation update, we provide the typical Croatian EUR investor with an in-depth market analysis, explanations of the individual asset classes, and the optimal portfolios under various risk tolerance levels. |
Issuing activity should slowly pick up again today after the Easter holidays, although the (European) market will first have to digest yesterday's much stronger than expected US ISM indicators. Expectations of interest rate cuts in the US were scaled back somewhat further yesterday in response to the surprising robustness of the manufacturing sector, in line with the significant rise in UST yields. On the data side, we are watching the inflation figures for Germany today, which will give us a foretaste of the euro area price statistics in the middle of the week. |
The ECB's upcoming "interest rate turnaround" is fueling the credit market and the renewed "search for yield". This is leaving its mark on the EUR credit primary market, where issues continue to be met with solid investor demand and new issue premiums continue to narrow. The secondary market was brought back to central bank reality and the re-pricing of the government bond curve resulted in meagre or even negative total returns. The first interest rate cuts by the central banks (ECB & Fed), which are now within reach, could give the credit market a slight boost, allowing investors to lock in the current yield and spread levels. Conversely, this should also lead to slightly tighter risk premiums in the short term before credit risk comes to the fore again at the end of H2 24. |
After a recent record syndicated transaction of EUR 3 bn, ARDAL is back to normal and plans to tap four existing bond lines next Monday, 18 March. Assuming full allotment at the upcoming auctions, around 2/3 of the official full-year SLOVGB issuance target will be covered, which is very impressive. The technical picture remains supportive and SLOVGBs offer value relative to peers. We note that most parts of the Slovak sovereign yield curve are currently above the BTP curve. |