Czech Government Bond yields under FX pressure

Mojmír Simerský

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents some results of the yield curve (YC) estimation method proposed in ([Sim]). We focus on the Czech Government Bond market in the period 2014-2017, when the Czech National Bank (CNB) weakened the CZK exchange rate by long-term currency interventions. The input data is the Czech daily fixing published online by MTS ([Mts1]). These quotations suffer, however, from a large bid-ask or YTM spreads, a fact that reflects itself in the YC estimation errors. Some 700 YCs were computed and histograms of yield estimation errors and of YC smoothness are given. Of interest is the comparison of the Czech benchmark zero-coupon yields at 1, 5, and 10 years with the ECB AAA yields ([Ecb]). Selected YCs in 2017 show that the outstanding depression of the short-term bond yields occurred in mid-January, some two months before the CNB announced the end of interventions (April 6). The termination itself influenced the Czech bond yields only moderately.

Keywords: yield curve estimation; zero-coupon yields; Czech bond market; Czech National Bank; ECB (search for similar items in EconPapers)
JEL-codes: C51 E43 G12 (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-mac
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