The Senate election and first-ever election to regional parliaments delivered a severe blow to the governing CSSD, cheered Four-party Coalition (4C), satisfied the ODS and sent the Communist high. Out of 27 Senate seats contested, just one (for the 4C) was won in the first round, 26 will see a face-off next Sunday. 19 advancing candidates are from the 4C, 18 from the ODS, 8 from the Communist and only 5 represent the Social Democrats. Out of 14 regional parliaments elected yesterday (Prague already has one), the ODS and the 4C both became the strongest party in six regions, one was won by the Communists. The Social Democrats came the fourth in most regions…
Prime Minister Miloš Zeman said that a soon rate hike would harm an economic recovery in the Czech Republic and thus criticised the Vice Governor Zdeněk Tůma for saying that a rate hike would be necessary if the economy growth strengthened. Prime Minister said that he would not want Zdeněk Tůma to become a Governor of ČNB. Later, vaclav Klaus echoed Zeman's critique.
The foreign ministry expressed its discontent with the recent European Commission accession report. The point of critics was an assessment of fulfilling of economic criteria, especially comparison between the Czech Republic, Poland and Hungary.
The Czech koruna stayed in a narrow range on Friday. Late on Friday the Czech koruna was traded at 34.74 against euro. The crown/dollar exchange rate strengthened to 40.25 from Thursday’s 40.45. An outlook for the Czech koruna remains favourable as economic indicators signalled that the economic recovery is on track.
Bonds dropped on Friday again. After CNB vice-governor's Zdenek Tuma comments about possible rate hike, everybody was on sell side. Prices dropped in the opening by more than a trading spread, and the fall continued. The longest bonds were the most losing again, losing as much as 70 bps; but surprisingly, short-term bonds, which should have been affected more by possible rate hike, recovered quickly after the morning fall, and some of them even reached Thursday prices again. Money market is also only a bit higher, CZK forex didn't much react either.
Current benchmark prices: MoF 6.75/05 98.75-05 (-25 bps), MoF 6.30/07 93.75/05 (-30 bps), MoF 6.40/10 91.65-95 (-60 bps).
(David Marek, Ondrej Schneider and Dalimil Vyskovsky)