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)