Czech bonds were influenced by euro zone markets development yesterday. They aimed south in low volume trade and due to earlier close could not react to trend change from the U.S.A. Therefore bond yields increased with the yield curve steepening and the spread between 10-year Czech and German bonds diminished below 1 pct.
The main event today is the CZK 7 bn. 3.75%/2020 bond auction. We expect that the demand should be sufficient and the whole volume will be subscribed.
Tomorrow the market expects CNB meeting. We do not anticipate any rate change; even the CNB governor acknowledged on Monday that Czech rates should be stabile in a short time horizon. However, the domestic scene could hardly give any significant incentive today and the main impulse for bond markets should come from eurozone markets, where a release of the German IFO index will be closely watched.
(CSOB - Investment research)