The Czech fixed-income market closed in a bullish steepening mode last week

The Czech fixed-income market closed in a bullish steepening mode last week as investors felt more assured that the Czech central bank will leave its repo rate on hold this week. Hence, the market partly extended its gains on dovish comments of CNB’s Bank Board member J. Frait, while another positive stimulus brought Reuters’ poll, which showed that 22 from 24 interviewed analysts expect the CNB to leave the official interest rate unchanged this Thursday.

Today, both domestic and external calendar is empty so the domestic market will probably stay in a wait-and-see mode ahead of two crucial central banks meetings – the Fed on Wednesday and CNB on Thursday. As we don’t expect the CNB to deliver a rate hike this week, there is still room for a positive correction (drop in yields) at the short end of the curve, because a smaller part of the market continues to bet on the 25 bps rate hike.

(CSOB - Investment research)