Trade deficit in June (CZK 10 bil.) was much higher than expectations and confirmed surging domestic demand pressures, evident in bouncy retail sales as well. Let's see whether the supply side will be able to match rising demand.
The CSOB's takeover of failed IPB gets into muddy waters: one of the shareholders of IPB, Restitution Fund (RIF), insists that the sale of IPB to CSOB is invalid. Useless to say, RIF investment strategy was determined by the old IPB. Meanwhile, another close affiliate of old IPB claims that it owns the IPB insurance company, most cherished by CSOB. Lawyers will have much to chew in coming months and it seems a good estimate that the CSOB put aside hundreds of millions for ensuing law battles.
The Cabinet is having its last meeting before the summer holidays. To finish a successful season, the Minister of Industry proposes to bail out yet another steel producing firms. This time, it should cost about CZK 4 bil., but it will save, the Minister says, 1,200 jobs. One job then costs more than CZK 3 mil. Money well spent…
The Czech koruna weathered Tusday's disappointing trade deficit rather well. It did lost against the euro, but only marginally from 35.55 to 35.63 CZK/EUR. The koruna held steady against the dollar at 37.93 CZK/USD. The koruna may be further supported by the news that the EUR 280 mil. that the Erste will pay as its first installment for 52 percent stake in Ceska Sporitelna will not go to a special account managed by the central bank. Instead, money will go to the National Property Fund which is in a cash flow troubles and will need Czech korunas, and fast. So dire is the NPF situation that it may even ask the Erste to send the second installment early.
Czech bonds were bearish again on Tuesday, but it was even a quieter day than usual. After disappointing June trade deficit market shifted down by a trading spread, however, no significant seller could have been seen in that time. We have only seen both buying and selling interest on particular issues, nor can it be specified on which part of the yield curve. Wednesday will probably be a quiet day again, with market waiting for Thursday's CNB board meeting.
Current benchmark prices: MoF 6.75/05 99.70-00 (unchanged), MoF 6.30/07 96.10-40 (-10 bps), MoF 6.40/10 95.70-00 (-15 bps).
(Ondrej Schneider and Dalimill Vyskovsky)