Tuesday, 18 November 2014 Headlines -0.6 EUR/CHF 1.20 0.1 EUR/PLN EUR/HUF EUR/USD EUR/CHF FX Correlation Matrix 0.12 0.19 0.01 0.05 EUR/CZK EUR/PLN 0.03 -0.15 -0.08 EUR/HUF -0.05 EUR/USD 0.06 -0.07 correlations of 10 min changes ov er past 5 sessions FRA 3x6 % bps chng CZK 0.31 2 HUF 2.05 -3 PLN 1.89 3 EUR 0.10 0 % bps chng GB Czech Rep. 10Y 0.81 0 Hungary 10Y 3.67 -7 Poland 10Y 2.60 -1 Slovakia 10Y 1.46 0 CDS 5Y % bps chng Czech Rep. 47 0 Hungary 172 0 Poland 66 0 Slovakia 51 0 Source: Reuters Yesterday’s trading was fairly calm in Central Europe. In the Czech Republic, markets remained closed due to national holiday. The Polish zloty and the Hungarian forint showed little activity and even in Hungary, where the government submitted details of the conversion of foreign currency loans into forints to the Parliament, the currency kept within a narrow band. The governmental proposal suggests mortgage loans to be converted at exchange rates 256.47 CHF/HUF and 308.97 EUR/HUF. Current exchange rates are 255 CHF/HUF and 306.3 EUR/HUF, i.e. slightly stronger than the proposed rates. According to Economy Minister Varga, however, the proposed exchange rates should be favorable for borrowers at the moment the conversion are planned to be made, i.e. in February 2015. Interest rates on the converted loans should be linked to 3-month BUBOR (currently 2.1 %), while interest premium should be identical with the original forex loans. The conversion is not put forward as compulsory; however, conditions for those who would want to opt out from the scheme would be strict. Regarding today’s data, Czech PPIs surprised by having fallen more in October than expected. According to the Czech statistical office, producer prices dropped 0.4 % m/m and 0.3 % y/y. The fall was caused first of all by prices of agricultural producers, which dropped 3.9 % compared to the same month previous year. While the market impact of the Czech PPI will remain very limited, we believe that much more attention will be paid to the fresh German ZEW index to be published later today. EUR/HUF 311 310 309 308 The forint says around its fourweek highs. 307 306 305 11/18/2014 1.24 11/16/2014 EUR/USD Czech PPI lower than expected 11/14/2014 -0.2 11/12/2014 4.22 11/10/2014 0.1 EUR/PLN 11/8/2014 -0.1 11/6/2014 306.4 11/4/2014 27.66 EUR/HUF 11/2/2014 EUR/CZK Hungarian government unveils details of FX loans conversion 10/31/2014 % chng 10/29/2014 Currencies EUR/HUF, last 15 day s. Source: Reuters Tuesday, 18 November 2014 Interest-rate Swap Curves 3,0 CZK HUF 120, 00 PLN 5 7 700, 00 100, 00 4 600, 00 2,0 160, 00 80, 00 5 500, 00 3 110, 00 60, 00 % 1,0 % 3 300, 00 % 400, 00 40, 00 2 60, 00 20, 00 2 1 2 1 3 2 1 1 200, 00 2 0,0 0, 00 1 - 40, 00 2Y 3Y 4Y 5Y change (bps) 6Y 7Y 11/17/2014 8Y 9Y 10Y 11/14/2014 1 1 1 1 1 2 2Y 3Y 4Y 5Y 6Y 7Y 100, 00 2 1 0 10, 00 0 - 20, 00 -1,0 1 0, 00 -1 -2 -2 -2 -3 -4 -4 -16 -6 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y change (bps) -7 - 100, 00 11/17/2014 -1 - 40, 00 11/14/2014 change (bps) 8Y 11/17/2014 9Y 10Y 11/14/2014 Calendar Country Tim e CZ 9:00 Indicator PPI Period % 10/01/2014 Forecast Actual Consensus Previous m /m y/y m /m y/y m /m y/y m /m y/y -0.2 -0.1 -0.4 -0.3 -0.2 -0.1 -0.3 -0.3 Contacts Brussels Research (KBC) Piet Lammens Peter Wuyts Joke Mertens Mathias van der Jeugt Dublin Research Austin Hughes Shawn Britton Prague Research (CSOB) Jan Cermak Jan Bures Petr Baca Bratislava Research (CSOB) Marek Gabris Budapest Research David Nemeth Global Sales Force Brussels Corporate Desk Institutional Desk France London Frankfurt Singapore +32 2 417 45 82 +32 2 417 46 25 +32 2 417 32 65 +44 207 256 4848 +49 69 756 19372 +65 533 34 10 +420 2 6135 3578 +420 2 6135 3574 +420 2 6135 3570 Prague +420 2 6135 3535 +421 2 5966 8809 Bratislava +421 2 5966 8820 +36 1 328 9989 Budapest +36 1 328 99 85 +32 2 417 59 41 +32 2 417 32 35 +32 2 417 30 59 +32 2 417 51 94 +353 1 664 6889 +353 1 664 6892 ALL OUR REPORTS ARE AVAILABLE ON WWW.KBC.BE/DEALINGROOM This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice. P. 2