Issuance activity: Tomorrow, MinFin is scheduled to auction CZK3.0bn of 2029 bonds, CZK3.0bn of 2035 bonds and CZK2.0bn of 2038 floater. So far this year, MinFin has issued a total of CZK269.8bn CZGBs on the primary market (MinFin projects CZK270 370bn for the full year), as well as an additional CZK121.8bn on the secondary market. The issuance calendar for the upcoming October auctions indicates that CZK17.0bn will be sold on the primary market. However, the Ministry of Finance usually increases the amount issued compared to the amount indicated in the calendars, with the year-to-date total amount sold being roughly double the indication.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK3.0bn of 2029 bonds, CZK3.0bn of 2035 bonds and CZK2.0bn of 2038 floater. So far this year, MinFin has issued a total of CZK269.8bn CZGBs on the primary market (MinFin projects CZK270 370bn for the full year), as well as an additional CZK121.8bn on the secondary market. The issuance calendar for the upcoming October auctions indicates that CZK17.0bn will be sold on the primary market. However, the Ministry of Finance usually increases the amount issued compared to the amount indicated in the calendars, with the year-to-date total amount sold being roughly double the indication.

Market situation: Bonds remain globally under pressure as an asset class. However, in relative terms CZGB ASW spreads have tightened significantly over the past week. Czech Flash CPI estimate for September showed inflation accelerating to 2.5% yoy (vs. 2.4% yoy expected). The increase from 1.9% yoy in August was mostly driven by an increase in fuel prices (contributing 0.3-0.4pp) and also easing decline in food prices, even as food and non-alcoholic beverages continued to decline mom in September. We estimate core inflation to be around 3.0-3.1% yoy in September (after 3.0% in August). We expect headline inflation to continue rising toward the end of the year, peaking at the start of the next year at over 3% yoy, with core inflation remaining elevated around the 3% mark.

Rates outlook: As for the short end of the CZK curve, our baseline scenario still anticipates that the CNB repo rate will remain at its current level for an extended period. However, energy-related risks, sticky core inflation and a public finance deficit of 3.5% of GDP next year (compared to the CNB’s August forecast of 2.9%) mean there is a risk of the CNB tightening its monetary policy further. In any case, market pricing of an additional four hikes within a one-year horizon seems 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 in our updated forecast.

Philip Morris CR announced its financial results for the first half of this year. Net profit decreased by 7.2% yoy to CZK1.5bn, while revenues remained stable at CZK10.7bn. This decline is due to the shrinking market for smoking products. The dividend for 2026 could reach CZK1,080 per share, representing a gross yield of +5.9%. The reported figures are slightly better (+1.9%) than our estimate in terms of net profit.

Philip Morris CR announced its financial results for the first half of this year. Net profit decreased by 7.2% yoy to CZK1.5bn, while revenues remained stable at CZK10.7bn. This decline is due to the shrinking market for smoking products. The dividend for 2026 could reach CZK1,080 per share, representing a gross yield of +5.9%. The reported figures are slightly better (+1.9%) than our estimate in terms of net profit.

Total revenue for 1H26 was slightly higher than last year (+0.4%), reaching CZK10.7bn. In the Czech Republic, revenue remained at CZK6.4bn. The number of units sold decreased by 3.1% yoy. This reflects a decline in the tobacco products market. However, favorable price trends offset this decline. The market share was 39.6% (39.8% in 1H25), with the decline in cigarettes (-0.6pps) nearly compensating for the increase in heated tobacco products (+0.4pps). In Slovakia, revenues stood at CZK3.1bn, up +3.0% yoy. Market share fell from 50.3% to 48.9%. As in the Czech Republic, the share of cigarettes fell by 2.1pps, while heated products rose by +0.7pps. The volume of units sold increased by +3.1% yoy, driven by smoke-free refills. Revenue from manufacturing services decreased by 4.1% yoy, reaching CZK1.2bn. This decline is due to the transformation of the production plant in Kutná Hora. Production of innovative products, such as nicotine pouches, began in May. This should be reflected in the results for the second half of the year. The decline in the tobacco products market is caused by consumers' shift towards innovative products. Operating profit fell 7.2% yoy to CZK1.8bn. This decline was primarily caused by a decrease in the sales volume of traditional products in both markets. This decline was partially offset by favorable price trends and the smokeless products. Net profit for 1H26 stands at CZK1.5bn, a 7.2% yoy decline.

Dividend: PMCR typically pays out its entire net profit. In our estimates, the results for the first half of the year suggest a full-year dividend of CZK1,080 per share. Compared with the current market price, this corresponds to a gross yield of +5.9%.