Foreign corporate bonds are entering the foreign exchange reserves of the Czech National Bank, Novinky reported.
Reserves rose by 11,58 miliardy eur to 160,39 miliardy eur, or roughly 3,9 bilionu Kč, by the end of October, according to Novinky. The central bank is adjusting its portfolio to boost expected returns and diversify holdings.
Reserves must appreciate over the long term and withstand various market conditions, board member Jan Kubíček told Novinky. The institution is steadily increasing its gold reserves toward 100 tons, while the share of equities in its reserves is heading toward 30 percent, Kubíček said.
Two-fifths of global central banks hold investment-grade corporate bonds with relatively low default risk in their portfolios, according to Kubíček. Between 1994 and 2024, corporate bonds delivered average annual yields 0.75 to 1.35 percentage points higher than US government bonds, figures cited by Novinky show.
Corporate bonds are another natural step,
Kubíček told Novinky, adding that they offer consistent excess yields over government bonds while maintaining a conservative approach. We invest exclusively in the investment-grade rating and only through index tools.
The Czech National Bank is moving its investments in US mortgage-backed securities to its internal team after external managers failed to deliver satisfactory results when accounting for fees, Novinky reported. Media24.cz also noted that the bank will invest in corporate bonds through bond indices to increase yields and improve diversification.
Six years of experience with external mandates did not bring the expected results, and the transition to internal management through ETFs and derivatives will bring us the necessary flexibility and lower costs,
Kubíček told Novinky. Investments in corporate bonds and mortgage-backed securities together will not exceed 10 percent of the relevant portfolio, according to Kubíček.
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