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Czechs sold government bonds with negative yield
Koruna hits a nearly two-month low
The Central European currencies fell against the euro yesterday. The Hungarian forint lost most but also the Czech koruna weakened significantly, up to its twomonth low (with trading volume well below recent week’s average, though).
For the first time ever, the Czech finance ministry sold a fixed-coupon bond (0.85%/18) with a negative yield in yesterday´s government bond auction. It could happen largely due to a firm commitment of the Czech National Bank to keep the koruna above EUR/CZK 27.0. (Let us recall that the CNB admitted its presence in the EUR/CZK market a couple of weeks ago.) Although the total volume of interventions against the koruna has not been disclosed yet, the volume of liquidity withdrawn from the market by the central bank in its open market operations has obviously risen in the recent weeks (see the chart below). Unrelenting CNB´s support for the koruna is good news from the perspective of the Czech FinMin. If the CNB keeps its FX intervention regime in place despite strong domestic macroeconomic figures and inflation lagging behind expectations (which is not an entirely unrealistic scenario), rarity of negative Czech GB yields may pass shortly...
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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