Producer prices grew 0.6% in June and the annual index shot above the 5% level (PPI stands at 5.1%). Oil prices were the main culprit, as usual. However, more worrying might have been accelerating agriculture prices that rose 16% in June, y-to-y.
There was little new yesterday as politicians began to take their holidays. Only the prime minister shone at his best in the night TV news when he defended his government. Besides a now-standard flurry of arrogance, he declared pension reform as prepared (Swedish model, you know…) and also blamed previous governments for high costs of bank and industrial bailouts.
The Czech koruna lose yesterday slightly against the euro to 35.55 CZK/EUR as opposed to the 35.45 CZK/EUR prevailing last week, but the volume of trading was low. As the euro was marginally easing against the dollar, the Czech koruna lost against the greenback as well: from 37.90 to 38.05 CZK/USD. Market remains wary of another central bank intervention, verbal or factual.
Czech bonds were falling again on Monday, after Friday's rather optimistic auction results. PPI figures were released in the beginning of this week, the number was higher than expected which should have pushed the prices lower. It did not happen immediately as people who were short prior to the auction were covering their short positions. However, the price rise was very short, as again the longest papers quickly lost their positions gained on Friday or Monday morning respectively. Issues most falling were MoF 6.40/10, mortgage bonds KB1 and KB2, and MoF 6.30/07, which was reopened on Friday.
Current benchmark prices: MoF 6.75/05 99.65-95 (-40 bps), MoF 6.30/07 96.25-55 (-35 bps), MoF 6.40/10 96.45-75 (-55 bps).
(Ondrej Schneider and Dalimil Vyskovsky)