Debt Portfolio Management Quarterly Report - 1st Half of 2018

Dept 20 - Debt and Financial Assets Management
Dept 20 - Debt and Financial Assets Management


  • Statistics
  • State Debt
  • Debt Portfolio Management

During the second quarter of 2018, the Ministry of Finance pre-financed most of the August redemption of the Czech Republic Treasury Bond, 2003 - 2018, 4.60 % in total nominal value of CZK 74.4 billion. High coupon rate of this government bond burdened the state budget with the annual expenditure of CZK 3.4 billion. The Ministry‘s effectively planned issuance of medium-term and long-term government bonds in the second quarter brought nearly 90% of the funds needed for this redemption, for the average yield of approximately 1.95% p.a. This interest rate differential represents an annual saving in the state budget starting in 2019, amounting to approximately CZK 2.2 billion.

Furthermore, during the first half of 2018, the Ministry benefited from favourable conditions on the money market, where government bond yields at the shortest end of the yield curve were lower than the stipulated basic monetary policy interest rate of the Czech National Bank and sold state treasury bills in total nominal value of CZK 174.5 billion. The funds received from these operations were further invested in repo and depo operations with a positive impact on the state budget. The additional net income from these operations amounted to CZK 109.4 million in accruals.

The nominal value of state debt at the end of the first half of the year is lower by CZK 75.3 billion compared to same period last year. The change of the nominal value of state debt over the course of each quarter is a common phenomenon caused, for example, by the mismatch of auction days distribution compared to several government bond redemptions during the year, and does not indicate the trend of the indebtedness.

The Ministry of Finance continuously reacts to the situation on the financial markets and together with effective debt and available liquidity of state treasury management, debt-to-GDP ratio has been decreasing in the long term, the decline in the debt-to-GDP ratio is also expected by the Ministry this year.