Czech bonds extended their losses as negative comments from new Finance Minister Tlusty hit the market. Tlusty’s comments imply that the 2007 budget gap could be wider, which implies richer bond supply next year. It is worth mentioning that following Tlusty press conference the CZK weakened, which further supported bearish flattening of the Czech yield curve.
Today, the only event is a release of the C/A figures, but we do not expect the bond market should move after these data. We expect the short end of the curve will keep watching a development on the FX market, while the long end will continue to track German Bunds.
(CSOB - Investment research)