Regional markets shrug off lingering debt crisis in the euro area

Inflation pressures are on the rise in New Europe, necessitating more aggressive policy moves. Local rates markets in the region remain under pressure, so that we prefer staying sidelined. Regional bond markets firmed in recent weeks, with government yields easing from highs touched lately on heightened inflation concerns. In line with our earlier short recommendation, the EUR/RSD temporarily touched our 98.40 target on May 6, so that we closed our short position at current levels and collect profits. External debt markets have remained impressively resilient in recent weeks, broadly shrugging of new debt jitters in euro area periphery markets