Czech bonds mainly followed core markets lower. The yields initially rose by 4 bps to pare some gains in the afternoon. The central bank stayed on hold as expected. Nevertheless, assessment of the situation changed compared to the February meeting. Now, governor Tuma sees only pretty slight anti-inflationary risk, while he talked about clearly anti-inflationary risk in February. Moreover, the Board voted unanimously in favor of flat rates yesterday, while one vote was for rate cut in February. In conclusion, the Board moved towards a neutral stance. Finally, the governor explicitly said the outlook for the monetary policy is neutral. All in all, period of flat rates lays ahead. The first interest rate hike is possible in July. Today, the domestic calendar is empty, therefore the market may digest yesterday’s events. An upgrade of the outlook of the sovereign rating on the Czech Republic may affect the market positively. Nevertheless, a development of core markets might be decisive.
(CSOB - Investment research)