On Tuesday, the Central European currencies experienced a calm trading. The zloty strengthened after the release of industrial production figures for October which surprised to the upside of expectations (4.6 % Y/Y vs 2.9 % Y/Y, 0.9% Y/Y after adjusting for seasonal effects). Moreover, Andrzej Kazmierczak, a hawkish member of the Monetary Policy Council (MPC), said yesterday that the central bank should be careful with interest rate cuts. Although Kazmierczak admitted that a further rate cut in December was possible, he said that the MPC should keep real interest rates rates in a positive territory in order to protect households’ savings. Kazmierczak thus echoed similar comments of his fellow MPC member Winiecki which indicates that some MPC members might not be comfortable with aggressive monetary easing. As a result, the zloty gained about 0.3% and the spread between FRA 6x9 and three month Wibor has tightened by 10 bps over past 10 days.
As concerns development on fixed-income markets it is worth noting some modest sell-off in the Czech bond market. It was probably motivated by pre-Christmas selling and by pre-positioning ahead today’s auction. Recall that the Czech state will sell its 5Y benchmark with a floating coupon and 9Y benchmark with a fixed rate.