The government approved a preliminary budget that incorporates CZK 20 bil. in revenues from the sale of the UMTS licenses and bets on a better tax collection. Expenditures were boosted in the education ministry. The ODS seems uncomfortable with the budget and Vaclav Klaus indicated that he might want the minister of finance to leave if the government insists on spending the UMTS windfall on current expenditures.
Anybody interested in the Czech koruna? It seems as the whole market was chasing the euro and driving it down: the hapless currency dived below 0.870 USD/EUR level, unheard of before. The euro's floor seems to be constantly falling… The Czech koruna was mostly loyal to the euro: it gained only marginally to 35.25 CZK/EUR. As the euro fell, the koruna weakened above the 40 CZK/USD level again.
Czech bonds rose again in very quiet trading on Wednesday. With bullish expectations on Friday's government bond auction market-makers and either clients seem to be building some long positions, as the result yield in the auction will most likely be lower than current market yields. Corporate issues were the most gaining ones again, however the yields are getting bit too low on these papers.
Current benchmark issues: MoF 6.75/05 101.30-60 (+5 bps), MoF 6.30/07 97.15-45 (+10 bps), MoF 6.40/10 96.10-40 (+15 bps).
(Ondrej Schneider, Dalimil Vyskovsky)