Czech bond yields felt by around 7bps due to the rising expectation on the rate cut in euro-zone. Interestingly, the yield of 10Y benchmark dropped to all-time lows and erased the whole increase reached during last week. We think that the Czech National Bank gets on with wait-and-see policy and will not cut the rates next week in accordance with the market expectations. The inflation outlook remains nearly unchanged with the exception of fuel, the economic growth is still high, based primarily on net export. Therefore the CNB has no reason to change the rates nowadays. The Czech bond market will watch the European market direction betting more and more on ECB’s cut. In our opinion Czech bond yields will fluctuate near the present lows today.
(CSOB - Investment research)