As September approaches, the government budget for 2001 gets (slowly) into the Cabinet focus. Useless to say, the time framework remains hopelessly flawed, as the Cabinet will have only one option, to say it is too late for any significant reforms. Given the ever-increasing role of the Konsolidacni banka and the imminent separation of the housing, transport and pension expenditures from the budget, the central government is indeed rendered almost irrelevant. The Konsolidacni announced that its assets grew to CZK 300 bil. Minister of finance would like to see it selling chunks of its portfolio, but the process is painfully slow.
The Czech koruna remained stable on Monday, as the market eyed the June foreign trade data, to be published today. Thus, the euro remains at 35.55 CZK/EUR and the US dollar strengthened marginally to 38.10 CZK/USD from 38.00 CZK/USD.
Bond market started the week in bearish mood. After bullish Friday, Monday seen a quick sell-off in the morning, while the rest of the day was very quiet. The market seems to be waiting for Tuesday's foreign trade figures, which could push the prices it higher. However, we do not expect a lasting bullish trend, especially the government bond auction in the beginning of August will be deciding. For the time being, the market seems to be a bit oversold in certain issues, so it's likely we could see few days without a significant drop of prices.
Current benchmark prices: MoF 6.75/05 99.70-00 (-10 bps), MoF 6.30/07 96.20-50 (-20 bps), MoF 6.40/10 95.85-15 (-20 bps).
(Ondrej Schneider and Dalimil Vyskovsky)