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CZGB Auction Preview: Supply to increase in the coming months, but the story likely won’t change

10/12/2021 12:28 PM

The MinFin is tomorrow scheduled to auction CZK5.0bn of seven-year bonds, CZK5.0bn of 12y bonds and CZK3.0bn of 15y bonds. The CZGB 2.50% Aug-28 and CZGB 2.00% Oct-33 return to auction after a six-month pause. Both bonds have room for further issuance of around CZK20bn each in the coming months. On the other hand, the CZGB 4.20% Dec-36 is likely to see its last auction tomorrow. We expect a market to decide between very low supply over the last three months and very expensive pricing in ASW terms. Asset spreads are multi-year tights for most bonds. On the supply side, according to our calculations, the government has covered around 80% of all borrowing needs for 2021. We expect supply to increase over the next two months, which should bring some relief to asset spreads. On the demand side, we expect further strong investor interest given the meagre supply of recent months. However, overall, we do not expect a significant change in the CZGB story until the first quarter. 

Autor: František Táborský
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