So, the Cabinet has done it again: after months of agonizing, the Ministry of Finance brutally eliminated tens of billions from the proposed expenditures. Yesterday, the Cabinet apparently decided to incorporate expected proceeds from the sale of UMTS licences into the budget revenues and, hoopla, the deficit will be the required CZK 20 bil. The money will be spend on boosting teachers' salaries - all to well, but how the wage boost will be financed in 2002?
Cracks began to appear in the so-far united government stance towards the scandal threatening the prime minister office where a smear document scandalising a parliament deputy speaker was found. The minister of interior indicated that he thought that the document originated in the prime minister office and that he needs to talk over the issue with the prime minister. It will be an interesting discussion…
The koruna held steady against the euro on Tuesday, hovering around its favored level of 35.30 CZK/USD. The koruna, however, got close to the 40 CZK/USD level vis-a-vis the dollar, as the US currency gained against the euro to 0.885 USD/EUR.
Czech bonds had a very quiet day on Tuesday, one of the usual in latest weeks. However, the mood was again more bullish, as market-makers might have been covering some of their short positions. The market seems to be waiting for Friday's CPI figures, as well as for the 3yr government bond auction. Therefore we expect Wednesday to be same quite day as previous ones.
Current benchmark figures: MoF 6.75/05 100.25-55 (+5 bps), MoF 6.30/07 97.05-35 (+15 bps), MoF 6.40/10 95.95-25 (+5 bps).
(Ondrej Schneider and Dalimil Vyskovsky)