They opened slightly weaker, but successful 2-year auction and overall bullish atmosphere spurred them stronger. They ones again overperformed German Bunds and even IRS. The demand in the auction wasn’t so impressive as last week, but investors bid pretty aggressively. Bid/cover ratio came at 1.5. There are many buyers on the market now and only few sellers. Moreover, the strong boom in the first week in January took some investors by surprise. Let us add that the market ignored above consensus rise in industrial output in November.
We will see whether positive sentiment will continue even today. The calendar is unattractive for fixed income until the end of January when the central bank holds the meeting. Thus, investor may watch the ECB and core markets. Also development of CE currencies is important, as strengthening koruna lures foreign investors. All in all, the bonds may track German Bunds, but might be reluctant to drop significantly, even if the ECB sounds hawkish today.
(CSOB - Investment research)