CZECHIA: MNI CNB Review - Feb 2025: Unanimous Hawkish Cut
Executive Summary:
- The Bank Board reduced the key rate by 25bp to 3.75%.
- The Board’s decision was unanimous.
- Communications accompanying the decision were rather cautious.
Click here to see the full review: MNI CNB Review - February 2025.pdf
All seven members of the Bank Board of the Czech National Bank (CNB) backed the decision to reduce the two-week repo rate by 25bp to 3.75%. The panel judged that short-term inflation risks are not materialising, while subdued external demand is creating a drag on domestic economy. However, the decision was framed as a “hawkish cut”, with the Bank Board still intending to keep the policy rate above historical levels. This is supported by the assessment that the balance of risks to the fulfilment of the CNB mandate is slightly inflationary, warranting caution going forward.
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GILTS: Long Futures Positioning A Potential Factor In Sell Off
Elsewhere, a reminder that our latest positioning indicator update (published yesterday) pointed to long positioning in gilt futures. That could be adding further fuel to the sell off.
GILTS: Further Selling
Further weakness in gilts accompanies pressure for GBP in FX trade, with the market in price discovery mode after finding fresh multi-decade highs in 30-Year yields and registering the highest level seen since ’23 in 10-year yields.
- Yields now 2.5-5.0bp higher across the curve, while futures trade as low as 90.75.
- Technicals for 10s & futures outlined in the prior post.
- No fresh UK headline triggers, but continued erosion of already limited fiscal headroom adds to wider pressure stemming from a reassessment of global term premium, hawkish U.S. data and a heavy start to ’25 IG supply, as well as medium-term structural headwinds for gilts.
- SONIA futures +0.5 to -9.0. Dec low in SFIZ5 untested. Nov low in SFIZ6 broken.
PIPELINE: Wednesday Data Calendar: ADP, Jobless Claims, FOMC Minutes, 30Y R/O
- US Data/Speaker Calendar (prior, estimate)
- 8-Jan 0700 MBA Mortgage Applications
- 8-Jan 0815 ADP Employment Change (146k, 139k)
- 8-Jan 0830 Fed Gov Waller eco-outlook (text, Q&A)
- 8-Jan 0830 Initial Jobless Claims (211k, 215k)
- 8-Jan 0830 Continuing Claims (1.844M, 1.860M)
- 8-Jan 1000 Wholesale Trade Sales MoM (-0.1%, 0.2%)
- 8-Jan 1000 Wholesale Inventories MoM (-0.2%, -0.2%)
- 8-Jan 1130 US Tsy $64B 17W bill auction
- 8-Jan 1300 US Tsy $22B 30Y re-open (912810UE6)
- 8-Jan 1400 Dec FOMC Meeting Minutes
- 8-Jan 1500 Consumer Credit ($19.239B, $10.500B)
