KBC Market Research Desk
KBC Bank
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CE markets face sell-off with global bond markets
CNB’s governor optimistic about the Czech economy
Yesterday, regional currencies including the Czech koruna and government bonds weakened across the board. Recall that Hungarian and Polish bond yields were higher by around 15 bps during a day. The main reason was probably sell-off on global bond markets – the 10-year German bund yield has moved 10 bps up from the beginning of the week.
As far as the Czech inflation figure concerns, it is slightly above the actual CNB forecast and it reduces the chance of further depreciation of the intervention level above the 27.00 EUR/CZK. Also Czech central bank governor Singer sounded quite optimistic at the meeting with exporters yesterday. He believed the Czech economy was currently in much better shape than a year ago. He stressed that profits of companies had grow by more than 17% and the number of vacant position was growing in the first half of the year.
Nevertheless we continue to believe the outlook of CNB is still too optimistic. We anticipate the interventions to have a lower secondary impact on the increase in domestic wages and domestic demand than the current August forecast of the CNB. In addition, we anticipate lower growth and inflation in the euro area than current CNBs external assumptions. This is why we predict slower growth in the Czech economy, especially for 2015. The worsened forecast may lead to another extension of CNB´s commitment to intervene against the Czech koruna. Currently the Bank Board does not expect to end interventions before 2016.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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