The CNB vice governor, and a front-runner for the governorship, Zdenek Tuma warned that the CNB might rise interest rates if economic growth continued to out-pace the CNB's expectations.
Czech politicians keep arguing what exactly the EU Commission wanted to say in its "Progress Report" on the Czech Republic. The EU's babble did not help, either, as the Commissioner Verheughen said that he considered the Czech Republic to be a leading candidate. So, leading from the third place?
Vaclav Klaus defended "the Czech way of privatization" and blamed the current finance minister - pavel mertlik - for being under the spell of unnamed foreign banks and consultants. The Czech privatization way was a way how to nurture Czech capitalism and how to avoid bribery, Mr. Klaus added.
A third of senators and thirteen brand new regional assemblies will be elected on Sunday. The ODS remains a favorite, but the three dominant formation - ODS, CSSD and Four Coalition - remain neck and neck.
The Czech koruna held steady and ignored the vice governor Tuma's mentioning of a possible rate hike. The koruna closed at 34.65 CZK/EUR, almost unchanged from 34.50 CZK/EUR on Wednesday. Similarly, the koruna barely moved vis-a-vis the dollar and closed at 40.40 CZK/USD.
The CNB's warning did not have an effect on the bond market, either. Bond prices were steady.
Bond prices dropped again on Thursday morning. However, the rest of the day was very quiet with only two exceptions on mortgage KB1 and Konsolidacni 10,875/04 issues, which were in demand. Stable IRS and CZK forex did not add any feeling to the market, and it's more likely that PPI figures on Monday would be the only thing than could change current dead situation on the market.
Current benchmark prices: MoF 6.75/05 99.00-30 (unchanged), MoF 6.30/07 94.05-35 (-10 bps), MoF 6.40/10 92.25-55 (-15 bps)
(Ondrej Schneider and Damilil Vyškovský)