Czech bonds closed little changed
yesterday as low (summer holiday) volumes
delivered little price action. The market
currently bets that CNB will rise its repo rate
by 25 bps next week, but this is not our
scenario. Majority of CNB’s Bank Board
should see the koruna still too strong, hence
the Board will continue to use low
(unchanged) rates as a tool against the
strong currency. From this perspective we
currently see some value at the front end of
the curve.
Today, the trading starts with the June
PPI figures, which matched the market
expectations (0.2% m/m). This just
confirms our view that the strong
currency keep price pressures low
despite high commodity prices The bond
market will, however, rather look at today’s
ZEW figures and even more important US
PPI.
(CSOB - Investment research)