The Czech yield curve steepened yesterday, as bonds at the short end were supported
by a stronger koruna, while yields at the long end followed their German counterparts
(slightly) higher Overall, the session was relatively calm.
Today, all market eyes will be on the Czech Statistical Office, which will publish the
January inflation figures. The estimate of January’s inflation is stricken by unusually
high uncertainty due to fundamental changes in the CPI basket. We assume that the
month-on-month value of the CPI will reach 1.6%, which corresponds to market consensus.
The current market estimate is, however; only slightly higher than last January’s
result, when prices grew by 1.4% m/m. January’s higher inflation is due, in our
opinion, to increased prices of electricity and increase in regulated rent, as well as to
a seasonal increase in food prices, increased TV fee, growing prices of newspapers,
etc. Also, we can count of inflation reflecting the increased consumer tax on cigarettes,
which increased in April 2006, but has not been reflected in prices until early
this year.
Regarding trading, given the discrepancy between market consensus and central
bank estimate (1.6% m/m versus 1.2% m/m), we expect an asymmetric reaction from
the market. Since at least part of the market bet on CNB’s inflation optimism,
the released figure at the market consensus should lead to some disappointment
and rates and yields should move higher in this case.
ČSOB - Investment research