Czech bonds aimed south on Tuesday; though their losses were only modest at the end. The fall was caused both by the euro zone market movement, while the unfavorable election results have been already priced in. Interestingly, the Czech yields tracked their German counterparts just partly as they bounced up only by 2 bps.
Today, the Ministry of Finance plans the CZK 7 bn. 2.55%/2010 bond auction. We expect the whole amount should be subscribed, but the demand could exceed the supply just slightly. Generally, the Czech market des not express too much interest for such maturities these days especially when the two other papers of the same maturity are scheduled to be issued in the third quarter. No other events are planned today; so the market can fall to a wait-and-see mode before important releases scheduled for Thursday and Friday when the May CPI and GDP for the first quarter should be released. Moreover, the ECB meeting with an expected 25 bps hike will be another eye-catcher this week.
(CSOB - Investment research)