The bearish flattening of the Czech yield curve was extended yesterday as CNB Vice-governor Singer warned that the debate about a possible rate move should be longer and more thorough on a (next) possible rate move, because inflation pressures were raising. According to Singer the risk assessment is shifting and the focus on the upside inflation risk will certainly increase (on the next meeting). Singer’s comments hit the market and as a result it has started to bet on even September’s hike. We do not think, however, that September hike is in the cards. The CNB bank board will rather wait for its new inflation projection, which should be released at the October meeting. Moreover, the recent comments of other CNB Bank Board members (Tuma, Frait) indicate that the central bank will wait with a next move for the next quarter.
Today, the focus of the Czech bond market will be on the August US core CPI data, which will set a direction for bonds globally. Hence we expect sideways trading ahead of the US release.
(CSOB - Investment research)