The Czech bond yields decreased slightly yesterday

The Czech bond yields decreased slightly yesterday, especially at the short end of the curve. The yields followed the trend of the euro market due to a lack of domestic impulses. Discussion about the budget proposal for next year shows that the government is not willing to deeply cut social expenditures and therefore it will have to issue more bonds in 2007.

On the other hand the Finance Ministry is thinking about the privatization of the Czech Airport and selling of 16% of the Czech energy company CEZ. The position of the government remains weak. It will have to ask for confidence in the Lower Chamber of the Parliament over next 3 weeks. Now it is nearly sure that the government will need more money from the market due to a higher budget deficit next year and that the Czech currency will not enter the ERM-II in 2007. Today the Czech market will watch the core ones and no larger movements of yields are expected.

(CSOB - Investment research)