The yields rose some 5 bps across the board, while core markets was almost unchanged. The atmosphere changed after US treasuries fell last week and are expecting to fall further. Under such environment, investors fear that Czech yields drop too much in previous weeks. As usual, the market ignored fresh macro data. Higher-than-expected rise in PPI and the drop of the koruna slightly loosed pressure on the central bank to cut interest rates. Nevertheless, we still expect a 25 bps cut at the end of the month. Today the pressure on Czech bonds might disappear for a while. Low inflation in Poland may raise attractiveness of regional bonds. Thus today domestic market may track core markets.
(CSOB - Investment research)