Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2035 bonds and CZK3.0bn of 2037 bonds. The May calendar indicates a total supply of CZK18.0bn of CZGBs in the primary auction, while the indicative issuance for 2Q is kept at CZK50.0bn. Overall, MinFin has sold CZK92.6bn of CZGBs in primary auctions, with an additional CZK50.6bn of taps and CZK38.1bn of switches on the secondary market year to date. Meanwhile, the Czech government has proposed amending national fiscal rules in a way that could potentially allow a public finance deficit wider than 3% of GDP next year. This is because the amendment proposed by the Minister of Finance would extend the escape clause to encompass most infrastructure investment. While previous pledges by the government capped the maximum deficit at 3% of GDP, the new proposal poses a downside risk to this assumption. The lower house of the Czech parliament may vote on the law as soon as next week.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2035 bonds and CZK3.0bn of 2037 bonds. The May calendar indicates a total supply of CZK18.0bn of CZGBs in the primary auction, while the indicative issuance for 2Q is kept at CZK50.0bn. Overall, MinFin has sold CZK92.6bn of CZGBs in primary auctions, with an additional CZK50.6bn of taps and CZK38.1bn of switches on the secondary market year to date. Meanwhile, the Czech government has proposed amending national fiscal rules in a way that could potentially allow a public finance deficit wider than 3% of GDP next year. This is because the amendment proposed by the Minister of Finance would extend the escape clause to encompass most infrastructure investment. While previous pledges by the government capped the maximum deficit at 3% of GDP, the new proposal poses a downside risk to this assumption. The lower house of the Czech parliament may vote on the law as soon as next week.

Market situation: Czech rates continue to follow trends in core markets, which are primarily driven by swings in sentiment caused by headlines about the conflict in the Middle East. The CNB's media quarantine begins on Thursday. Both Board Member Jan Kubíček and Deputy Governor Eva Zamrazilová have recently expressed similar views, stating that there is no need to rush monetary tightening.  While acknowledging that a rate hike is more likely, they said that the central bank should not react to the initial effects of higher fuel prices, but rather closely monitor the potential impact on other areas of the consumer basket, as well as inflation expectations and wage demands. Furthermore, they noted that some tightening has already occurred due to the recent rise in CZK IRS. At today’s conference, Jan Fraint also expressed no major pressure to raise interest rates immediately.

Rates outlook: Given that the CNB is relatively well positioned to navigate the oil price shock, we expect it to wait for more clarity rather than act pre-emptively at this stage. Rate hikes may only be on the table if there are significant second-round effects on other components of inflation. For now, we are keeping our call for CNB policy unchanged and therefore continue to expect interest rates to remain on hold until the end of the year.

This morning, Philip Morris CR released its annual report. For the second half of last year, net profit reached CZK1.4bn. This figure represents a 4.2% yoy decline and falls short of our original estimate by 10.5%. PMCR proposes paying a dividend of CZK1,100 from last year's profits. This offers a gross yield of 5.7%.

This morning, Philip Morris CR released its annual report. For the second half of last year, net profit reached CZK1.4bn. This figure represents a 4.2% yoy decline and falls short of our original estimate by 10.5%. PMCR proposes paying a dividend of CZK1,100 from last year's profits. This offers a gross yield of 5.7%.

Half-Year Results: In the second half of 2025, total revenues fell by a modest 2.0% yoy to CZK11bn. This result is 5.1% weaker than our estimate. The Czech market generated CZK6.7bn, virtually unchanged from last year. In Slovakia, revenues decreased by 3.2% yoy to CZK3.1bn, likely due to a decline in units sold. Revenues from manufacturing services fell by 7.8% yoy to CZK1.2bn. This decline is due to adjustments in production related to the preparation of new production lines. Gross profit reached CZK4.6bn (-3.6% yoy). The decline is driven by lower sales and inflation in production costs. However, due to strict control of operating costs, particularly administrative costs (-12% yoy), operating profit remained nearly stable yoy at CZK1.8bn (-0.6% yoy). The margin increased by two-tenths of a percentage point to 16.6%. Net profit for 2H25 reached CZK1.4bn (-4.2% yoy).  

Full-Year 2025 Results: PMCR reported a net profit of CZK3.0bn for the past year, which represents a yoy decline of 9.2%. This translates to an EPS of CZK1,106. Its market share in the Czech Republic fell from 40.6% a year earlier to 39.5%. The share of heated products remained at 14.8%, while the share of conventional cigarettes declined to 24.7% from 25.8%. PMCR's market share also declined in Slovakia, falling to 50.1% from 52.6%. The share of cigarettes fell to 34.1% from 36.0%. However, contrary to our estimates, the market share of heated products also declined, falling to 16.0% from 16.6%.

Dividend: PMCR proposes paying shareholders a dividend of CZK1,100 per share from its 2025 profits. Compared to the current market price, this implies a gross yield of 5.7%. This dividend must be approved by shareholders at the Annual General Meeting on May 29, 2026. The last trading day with dividend rights is expected to be Thursday, June 4, 2026. Dividend payments will begin on July 13, 2026.