On Friday, the zloty and the koruna barely changed while the Hungarian forint and government bonds remained under pressure. Rising yields of US government bonds may be responsible for recent lacklustre demand for the Central European bonds; in the course of the past week, the yield of 10Y Hungarian government bonds had risen by 50 basis points. Moreover, the recommendation of the European Commission to lift the Excessive Deficit Procedure against Hungary may also have added pressure on the country´s government bonds. Despite losses, the forint has remained seated well below the EUR/HUF 300 level.
The May release of Czech and Polish PMI by Markit early this morning surprised markets on the upside. The Czech Purchasing Manager index even slightly surpassed the critical level of 50 points (by 0.1 percentage point) for the first time in last fourteen months, indicating thereby improvement in overall manufacturing conditions. This finding is in line with our view of the Czech economy having bottomed out in the first quarter (in the second quarter, we expect quarter-onquarter stagnation of the GDP). Regarding the Polish PMI, it did not emerge from the below-50-points area as new orders fell deeper. In a separate report, based on a different methodology, the Hungarian statistical office announced Hungarian PMI to have fallen to 47.1 point in May.