Czech bonds surged yesterday as the
market was positively surprised by very low
October’s inflation readings (for more see
the news section). Yields dropped across
the board - Rates and yields dropped by
around 7 basis points at the front end of the
curve. While there are still some residual
chances on a rate hike in December
discounted, the market shifts its attention
clearly to the January meeting for a CNB
rate hike. It means that the market is
gradually moving towards our position.
As concerns yesterday trading its worth
adding that there was an auction of 4Y
benchmark, which met very solid demand.
Today, while the market might continue to
digest low October inflation figures it can
even further bet on more favourable inflation
prospects for 2007 as the Parliament
approved a lower-than-planned tax hike on
tobacco. This might continue to support
instruments at the front end of the curve.
(CSOB - Investment research)