The yields on some Czech state bonds have fallen below zero following claims from the country’s central bank that it will continue its policy of holding the value of the koruna at 27 per euro. Tomas Holub said last week the Czech National Bank (CNB) would resort to negative interest rates for certain short-term loans.
The CNB began suppressing the value of the koruna in 2013 in order to support the country’s exporters by allowing them to sell to customers abroad at relatively low prices. It’s this very success which is now putting new pressure on the country’s currency, however the CNB has expressed its willingness to intervene by buying euro in order to devalue the koruna. Jan Cermak of CSOB told Hospodarske noviny that if the CNB becomes uncomfortable about such interventions, “it will have to move to some form of officially negative interest rates.”
