The Czech yield curve flattened yesterday as the long end tracked a positive development in the euro-zone, while the front end moved marginally higher. It seems that after worse-than-expected May’s inflation the market has started to push its rate hike expectation forward. We still think that unless the Czech koruna weakens more visibly this strategy will prove to be wrong as inflation should dip back below the CNB long-term inflation target (3.0%) in upcoming days. There are two interesting releases today – the May PPI and balance of payments figures for April. While especially the former figure (moreover the figure came, however very close to the market consensus as it reached 0.3% m/m, 1.5%) could grab some market attention, today’s price action (particularly at long end of the curve) should be determined by a development on core markets, which are awaiting US inflation figures.
ČSOB Investment Research