The yields slid some 3-5 bps. The key event was the 10-year auction of 3.8/2015, which was well-received. The Finance Ministry raised sold amount to CZK 7.7 bn, while investors demanded CZK 17.4 bn. Average yield stood at 3.321 %. The market shrug off the May inflation, which fell to a 18-month low, namely 1.3 %. Inflation should fluctuate around that level in several month to come. It made the central bank comfortable with actual interest rates. Today, the key event might be the Q1 GDP due in the morning. Economy slightly decelerate its pace in the last quarter, but it topped forecasts. Moreover the Q4 2004 growth was revised upwards. Hence the economy is in perfect condition, no rate cuts are necessary. Yet the market might awaits an appearance of Fed’s chairman Alan Greenspan in the Congress at 14:00 GMT. Investors are afraid Greenspan will burst recent bonds’ bubble. Thus the market might be quiet during the European trade and volatile at the beginning of American one.
(CSOB - Investment research)