The lower than expected US core PPI pushed the yields of the Czech longer maturities down

The lower than expected US core PPI pushed the yields of the Czech longer maturities down. The short end of the yield curve was rather stable, even after the comments by central bank governor Tuma, who declared that the risks to inflation forecast are still more or less balanced. Also other members of the CNB board were speaking yesterday including rather hawkish comments by vice governor Niedermayer. After all it seems to us that there might be members in the board trying to push through the rate hike as soon as next week. On the other hand we believe that decisive should be the position of the governor, who seems to prefer to wait till the next inflation forecast in October.

Today the Czech bonds should more or less track the development on the core markets. This should be primarily influenced by waiting for the Fed’s rate decision and upcoming comment. Hence we believe rather in the stability of the yield curve, possibly in slight decline at the long end.

(CSOB - Investment research)