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2024/01/15 / Erste Group Research

Fiscal slippage becoming drag for further decline of yields in CEE

Most of the inflation decline has already taken place. We can say the same about bond yields, given that monetary easing has already been strongly priced in. Nevertheless, Czech, Polish and Serbian bonds have some potential to see further compression of yields. Bonds in other countries look relatively expensive at the moment, unless inflation surprises on the downside or the fiscal situation improves unexpectedly.

As for the public finance stance in the region, we beleive Croatia has fiscal space to increase government spending in 2024. Czechia and Hungary plan to consolidate public finances, while all other countries will keep their deficits mostly unchanged or reduce them only marginally in 2024. With reinstalled (or new) EU fiscal rules, more progress can be expected only in 2025. All in all, elevated deficits will keep net issuance at high level in 2024.

Croatia may see another series of upgrades, once the dust settles after the elections. Serbia is chasing an investment grade rating with a potential timeline for outlook upgrades in 1H24, followed by a rating change in 2H24 (conditional on reforms). On the other hand, Slovakia and Romania face credit-negative risks, due to the fiscal situation and high budget deficits. 

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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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