Czech yields vying for global top spot

By bne IntelliNews October 18, 2016

The Czech Republic is challenging Switzerland for the world’s lowest yields, as speculative capital pours into local currency debt in anticipation of a boost for the koruna next summer, when the Czech National Bank is likely to remove a cap on the currency.

Czech sovereign two-year notes fell to a record low -0.94% on October 18, Bloomberg reports. That is 7bp below the equivalent Swiss benchmark. However, Czechia's hold on the top spot was short-lived, as the yield rose 2bp to -0.89% and the Swiss notes dropped 3bp to -0.97%.

After applying a cap of CZK27 to the euro in late 2013, Czech yields fell into negative territory at a primary auction for the first time ever in early September. Demand is being supported by the growing economy and excessive liquidity in the banking sector, but first and foremost by bets by foreign investors that the koruna will rise sharply when the central bank's cap on the currency is removed.

Monetary policymakers in Prague have spent months trying to talk down the speculation, but interventions have spiked since the summer. The CNB has recently reiterated that it will not abandon the cap until at least the end of the first half of 2017.

Regular comments regarding moves to soften any rise in the value of the koruna following the end of the official intervention regime are also being repeated. The CNB is keen to avert the risk of a huge surge in the koruna similar to that of the Swiss franc in early 2015 as the SNB removed its own currency cap.

Prague has said it plans to raise issuance in a bid to take advantage of low borrowing costs currently available. However, the finance ministry has slashed its offers in auctions this year as it chases negative yields.

Prague will offer up to CZK8bn in 2-year bonds at an auction on October 19, alongside 2023 and 2030 notes.

Related Articles

Fitch affirms Kazakh uranium miner Kazatomprom 'BBB-'

Fitch Ratings has affirmed the long-term foreign currency issuer default rating (IDR) of Kazakhstan's state-owned uranium miner Kazatomprom at 'BBB-' with a stable outlook. ... more

Higher rates not helping Turkish lira as it slides towards new record lows

The Turkish lira hit to a new historic low of 3.4768 against the US dollar in early trading hours of November 25, a day after the ... more

Russia's Rosneft approves $17bn worth of borrowing

Russia's state-controlled oil giant Rosneft has approved borrowing RUB1.07 trillion ($16.6bn) in 10-year foreign currency bonds, Vedomosti daily reported on November 25. ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss