There was a positive spillover from German market after rather neutral comments of Jean Clude Trichet on future development of interest rates in eurozone. In addition the Czech bonds again outperformed their German counterparts. Hence the spread of yields on 10-year Czech and German bond dropped to 10 bps. The yield on 10-year bond declined by 4 bps to 3.38% and that one on 2- year bond by 5 bps to 2.57%. Spread tightening continues between CZK 10Y and Bund 10Y yields.
For today, the investors should not be surprised by December’s PPI. The sentiment towards bonds is generally positive as the strong koruna and lower inflation reduces the expectations of fast interest rate hikes. Even though we believe the space for further strengthening, especially in case of short maturities, is rather limited.
(CSOB - Investment research)