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Financials Remain Vulnerable Despite Surging Bond Yields

CZECHIA
  • Czech financials have been trending lower in the past two weeks despite the surge in ST bond yields.
  • Czech 2Y yield, which has been one of the major drivers of financial equities in the past two years, surged to a new high of 5.75% following CNB’s hawkish statement last week.
  • On the other hand, Czech financials (MSCI)broke back below the 1,072.90 support this morning (which represents the 23.6% Fibo retracement of the 988.10 – 1,347.20 range).
  • The surge in recession risk due to the Ukraine war has left cyclical equities (i.e. financials) vulnerable since the start of the year.
  • The chart below shows the significant divergence between Czech equities and the 2Y yield in recent weeks.

Source: Bloomberg/MNI

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  • Czech financials have been trending lower in the past two weeks despite the surge in ST bond yields.
  • Czech 2Y yield, which has been one of the major drivers of financial equities in the past two years, surged to a new high of 5.75% following CNB’s hawkish statement last week.
  • On the other hand, Czech financials (MSCI)broke back below the 1,072.90 support this morning (which represents the 23.6% Fibo retracement of the 988.10 – 1,347.20 range).
  • The surge in recession risk due to the Ukraine war has left cyclical equities (i.e. financials) vulnerable since the start of the year.
  • The chart below shows the significant divergence between Czech equities and the 2Y yield in recent weeks.

Source: Bloomberg/MNI