By the end of 2023, foreign investors had amassed Czech government bonds worth over a trillion crowns for the first time in history, according to data released by the Ministry of Finance. Their share of all issued bonds surged to 35.4 percent, up from 28.79 percent in September. However, Jakub Seidler, the chief economist of the Czech Banking Association, clarified that this year-end fluctuation was a one-time occurrence driven by transactions between Czech banks and their foreign parent companies.

Foreign investors closed the year holding Czech state bonds valued at 1.05 trillion crowns, reflecting a year-on-year increase of 350.7 billion crowns. The total indebtedness of the Czech Republic through bonds reached 2.96 trillion crowns by December 31.

The proportion of bonds held by foreign investors escalated by 8.65 percentage points to 35.4 percent compared to the previous year. Despite fluctuations, the share of bonds held by foreign investors had remained relatively stable between 27 and 29 percent since the beginning of 2022, correlating with the Czech Republic’s escalating state debt.

Seidler emphasized that the year-end fluctuation was an anomaly, primarily resulting from methodological adjustments capturing transactions between Czech banks and their foreign parent entities. The Ministry of Finance echoed this sentiment, attributing the captured change to alterations in legal ownership while affirming that the economic ownership of the bonds remained with Czech banks.

Looking ahead, state bonds worth 162.7 billion crowns are due this year. The state aims to replace these bonds by issuing new ones. The Ministry of Finance’s Financing Strategy and State Debt Management plan to offer short-term and medium-term bonds worth 300 to 400 billion crowns on the market in the current year, outlining their approach to managing the state’s debt obligations and financial stability.

Article by Prague Forum