Issuance activity: Tomorrow, MinFin is scheduled to auction CZK2.0bn of 2034 bonds, CZK3.0bn of 2035 bonds and CZK2.0bn of 2043 floater. So far this year, MinFin has issued a total of CZK207.1bn in bonds on the primary market (MinFin projects CZK270–370bn for the full year), as well as an additional CZK121.8bn on the secondary market. 

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK2.0bn of 2034 bonds, CZK3.0bn of 2035 bonds and CZK2.0bn of 2043 floater. So far this year, MinFin has issued a total of CZK207.1bn in bonds on the primary market (MinFin projects CZK270–370bn for the full year), as well as an additional CZK121.8bn on the secondary market. In our view, issuance activity in the coming months is likely to remain subdued, with the full-year volume of CZGBs sold on the primary market to be closer to the lower end of the range indicated by the MinFin. We estimate that the cash state budget deficit will reach CZK360bn next year, with the total public finance deficit widening from 2.8% of GDP this year to 3.2% of GDP. Overall, the CZGBs may benefit temporarily from a successful retail bond campaign. However, the negative effects of a widening budget deficit and a higher volume of refinancing should begin to dominate next year. More in the Czech Economic Outlook: https://bit.ly/CEO_3Q26_EN.

Market situation: Over the past two weeks, Czech government bond yields have risen steadily across the curve, with the increase being most pronounced at the long end. The 10-year yield crossed the 5% threshold this week. The curve has remained upward sloping due to the development in core markets, with the bear steepening dynamic continuing.

Rates outlook: We continue to expect the CNB key rate to remain at 3.75% for the remainder of this year and throughout 2027. The current level of interest rates should gradually contribute to a moderation in wage growth and other domestic inflationary pressures. Although we expect inflation to temporarily rise to around 3% at the turn of this year and the next, incoming data already point to a gradual easing in the momentum of several key inflation drivers, including wage growth, credit expansion and residential property prices. More here: https://bit.ly/CNB_Focus_Aug26_EN.

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

Revenue for the second quarter totaled CZK74.7bn. This represents a slight yoy increase of +0.8%. However, EBITDA fell by 23% yoy to CZK23.8bn. This is 8.7% below the consensus estimate. As expected, the decline in EBITDA was negatively impacted by lower electricity prices, which affected the Generation segment. This sector also recorded a loss from Trading where positions were revalued. However, Mining and Distribution both saw yoy growth. Net profit, adjusted for exceptional items and non-controlling interests, increased by +8% yoy to CZK4.3bn. As anticipated, this growth was driven by a substantial decrease in the effective tax rate, due to the absence of a special tax (WFT).

The leverage ratio, measured as net debt to EBITDA, remained unchanged at 1.6x on a quarterly basis. However, both debt and cash increased due to the dividend payment in August.

Guidance for 2026: CEZ has once again increased its targets for this year. This is based on higher electricity prices, which are set to rise to EUR106–110MWh (previously EUR104–108MWh), higher output from nuclear power stations, and higher profits in the Distribution sector. According to the new forecast, EBITDA is expected to reach CZK109–114bn (+1.8% compared to the previous forecast of CZK107–112bn), while net profit is expected to reach CZK31–35bn (+3.1% compared to the previous forecast of CZK30–34bn).

According to our model, EBITDA should total CZK112.5bn, while net profit should total CZK37.4bn. The market is expecting CZK112.6bn and CZK36.8bn respectively.

The results reported for 1H26 represent 53% of CEZ’s revised full-year target for EBITDA and 54% for net profit (mid-range).

Compared with previous expectations, the estimated output from the gas-fired power station and the nuclear units has increased. Conversely, the outlook for renewable energy sources has been revised downwards.