The National Property Fund expects to spend as much as CZK 70 bil. on environment-related costs. This would eliminate most of the NPF's expected privatization revenues. Also, the long-serving CEO of Komercni banka again defended the bank's business with fraudulent BCL company that cost the KB more than CZK 8 bil.
So, it came, after all, and the Czech koruna did lose slightly vis-a-vis the euro, even without a helping hand from the central bank. The koruna eased from 35.25 to 35.40 CZK/EUR. The koruna, though, gained against the dollar to 38.75 CZK/USD. A strong rebound of the euro was behind the moves, though, as the euro strengthened to 0.918 USD/EUR and as the koruna was unable to keep up with the surging euro.
Czech bond market was nervous on Tuesday. After two days of rising prices the bond market started in bullish mood again, with corporate bonds in demand. However, the day was not that bullish anymore, in the end of the day we have seen selling interest on both government and corporate issues and prices fell by a trading spread in certain cases. The only paper in demand was MoF 6.90/03; on the other hand, the longest governments MoF 6.30/07 and 6.40/10 (the one reissued on Friday) fell in the afternoon. With the lack of economic data coming out this week and nervousness on the secondary market (still some short positions to be covered) it's hard to predict the market for next days. We are still pretty convinced it's time to sell, with current prices we are bearish again.
Current benchmark prices: MoF 6.75/05 101.10-40 (-15 bps), MoF 6.30/07 96.80-10 (-40 bps), MoF 6.40/10 96.05-35 (-20 bps).
(Ondrej Schneider and Dalimil Vyskovsky)