Czech bonds extended their losses on Friday as the market continued to rise it expectations for a rate hike. Though the Czech currency is steady, the front end the curve aimed further up. Looking at FRA rates the market began to bet on July’s hike. We still think unless the Czech currency weakens significantly, CNB will not be in hurry to increase rates, so the yield curve might become even steeper than now. While the long end of the curve should follow the German market, the short end will closely monitor the FX market to asses whether CNB will have some room to act this Thursday, when the Bank’s board meets.
(CSOB - Investment research)