Czech bonds tracked German Bunds lower yesterday, but no sell-off occurred. In fact, the market was really quiet and we witnessed negative price action on pretty thin market. German yields outperformed Czech ones, hence the long-maturity spread tightened again.
Today the May PPI drop, namely 0.7% m/m, may not affect the market significantly. PPI is less important inflation indicator and the central bank is not ready to change interest rates now. Hence the market may get ready for tomorrow’s 4-year tender, the finance ministry will offer papers worth CZK 8 bn. Atmosphere is less positive compare to the last week, but interest for such short-maturity papers might be high enough. Nevertheless, the price action may follow Bunds’ action.
(CSOB - Investment research)