Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2030 bonds and CZK2.0bn of 2036 floater. So far this year, MinFin has issued a total of CZK282.8bn CZGBs on the primary market (MinFin projects CZK270 370bn for the full year), as well as an additional CZK121.8bn on the secondary market. While we estimate that around CZK40.0bn remains to be issued in the context of this year’s financing needs, we believe that the year-to-date average issuance pace of around CZK30.0bn CZGBs per month can be maintained. This may help to smooth the issuance profile in anticipation of a more supply-heavy 2027.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2030 bonds and CZK2.0bn of 2036 floater. So far this year, MinFin has issued a total of CZK282.8bn CZGBs on the primary market (MinFin projects CZK270 370bn for the full year), as well as an additional CZK121.8bn on the secondary market. While we estimate that around CZK40.0bn remains to be issued in the context of this year’s financing needs, we believe that the year-to-date average issuance pace of around CZK30.0bn CZGBs per month can be maintained. This may help to smooth the issuance profile in anticipation of a more supply-heavy 2027.

Market situation: Bonds yields remain elevated. However, in relative terms CZGB ASW spreads have widened only marginally over the past week. The final reading confirmed that Czech CPI inflation had accelerated to 2.5% yoy in September, up from 1.9% in August. This increase was primarily driven by rising fuel prices. Core inflation increased to 3.1% yoy in September (up from 3.0% in August and July), which was 0.2pp above the CNB's forecast. Furthermore, the seasonally adjusted core mom dynamics strengthened to 3.5% annualised.

Rates outlook: Given the rise in core inflation and its momentum, we now expect the CNB to raise key repo rate by 25bp to 4% at its upcoming November meeting. Although further rate hikes beyond the November meeting cannot be ruled out, we still consider the market’s expectation of a repo rate rising to near 5% over the next year to be excessive, as confirmed recently also by comments from the CNB. Longer CZK IRS and CZGB yields are likely to continue to mimic the core markets, with neither 10-year Bund yields nor 10-year EUR IRS having peaked yet, according to the external assumptions of our forecast.

In a press release, CEZ announced that it had received a notice from a Luxembourg court bailiff regarding two Luxembourg entities: The first is CGN (Czech Gas Networks S.à r.l.), in which CEZ holds a 55.21% stake. The second is CGNI (Czech Gas Networks Investments S.à r.l.), which is wholly controlled by CGN. CGNI wholly owns the Czech company Czech Grid Holding, a.s., which in turn owns GasNet, s. r. o., and GasNet Služby, s. r. o.

The situation relates to the Diag Human case and its claims against the Czech Republic, which amount to CZK17bn. The decisions of the Luxembourg officer only restrict the rights to dispose of the assets of CGN and CGNI.

CEZ considers the decisions to be both unlawful and vexatious. It will challenge them in court. CEZ expects the decisions to be overturned within a matter of months.

The decision relates solely to assets in Luxembourg. From a layperson’s perspective, however, it will not affect business in the Czech Republic at all. It should not restrict the companies' operations or cash flows. Diag Human has no legal claims against CEZ. Any such claims should be directed exclusively against the Czech Republic, not CEZ.

In a press release, CEZ announced that it had received a notice from a Luxembourg court bailiff regarding two Luxembourg entities: The first is CGN (Czech Gas Networks S.à r.l.), in which CEZ holds a 55.21% stake. The second is CGNI (Czech Gas Networks Investments S.à r.l.), which is wholly controlled by CGN. CGNI wholly owns the Czech company Czech Grid Holding, a.s., which in turn owns GasNet, s. r. o., and GasNet Služby, s. r. o.

The situation relates to the Diag Human case and its claims against the Czech Republic, which amount to CZK17bn. The decisions of the Luxembourg officer only restrict the rights to dispose of the assets of CGN and CGNI.

CEZ considers the decisions to be both unlawful and vexatious. It will challenge them in court. CEZ expects the decisions to be overturned within a matter of months.

The decision relates solely to assets in Luxembourg. From a layperson’s perspective, however, it will not affect business in the Czech Republic at all. It should not restrict the companies' operations or cash flows. Diag Human has no legal claims against CEZ. Any such claims should be directed exclusively against the Czech Republic, not CEZ.