Reserve diversification adds corporate bonds and internal MBS management
Investment-grade corporate bonds now form part of the Czech National Bank's (CNB) reserves, while mortgage-backed securities move to internal management. Both use ETFs and derivatives; combined exposure cannot exceed 10 percent of the relevant portfolio.
External mandates end after underperformance
The Bank Board approved the changes on April 23, 2026; most took effect in Q3 2026.
External managers had run US mortgage-backed securities (MBS) portfolios since late 2019, accounting for less than 10 percent of the USD bond portfolio.
Results lagged the benchmark and net-of-fee returns disappointed.
Rising rates in 2022 and 2023 hurt MBS more than conventional bonds.
The CNB retained exposure, citing a historical long-term return advantage of 30–75 basis points over US Treasuries.
Internal management through exchange-traded funds (ETFs) and index-linked derivatives aims to lower costs and improve flexibility.
MBS was the last externally managed portfolio after equity mandates ended in 2023.
Corporate bonds have limits but no target allocation.
Index exposure limits issuer risk
Corporate bonds aim to raise long-term returns and diversify reserves.
Almost 40 percent of central banks hold investment-grade corporate bonds.
Over 1994–2024, annual returns averaged 75–135 basis points above US Treasuries, with a more favorable Sharpe ratio than government bonds.
The CNB uses diversified indices rather than individual bonds to limit default losses.
Board member Jan Kubíček linked the changes to gold holdings progressing toward 100 tonnes and equities toward a 30 percent target.
Governor Aleš Michl proposed the asset-class study commissioned in early 2025.
Returns remain the test
The CNB reported CZK 133 billion in cumulative profit during 2023–2025 as it implemented its reserve strategy.
In 2025, reserve returns reached a record 10.3 percent, equivalent to CZK 253 billion.
Its digital-asset test portfolio, created after discussion of the study in November 2025, remains outside international reserves.