The Czech bonds followed the European ones and firmed moderately yesterday, supported by the close voting of the CNB's board (4:3). According to the Governor, the new inflation prognosis is consistent with a gradual growth of interest rates, but the timing and the extent of the growth of rates are more uncertain than ever before. We suppose that a sit-and-wait policy will now prevail. We therefore think that another rate hike (25bps) can be expected within six months. A split of the CNB's board supports that scenario; moreover, the strong koruna should brake the hawks in the board. Today no larger yield changes expected.
(CSOB - Investment research)