The Czech National Bank expects the inflation rate to exceed 7% in January and to continue to rise in the first quarter of the year. The situation forced investors to look for ways to stop the depreciation of their money. Banks report an increased interest in corporate bonds.
BRNO – Based on the data of the Czech National Bank, the inflation rate in November this year was 6%. According to predictions, the situation is not expected to change next year; on the contrary, inflation will probably culminate at the beginning of the year. The CNB expects that in January the inflation rate will exceed 7%. Inflation should continue to rise at least throughout the first quarter of the year. Based on this prediction, the overall yearly inflation rate in 2022 is not expected to drop below 5.6%.
The account will not cover even half of the loss
Due to the interconnectedness of countries, the situation in the Eurozone is very similar. In Germany, which is the biggest business partner of the Czech Republic, the inflation rate reached 5.2% in November. The year-on-year increase of consumer prices in retail shops was 16.6%. This negative tendency in EU countries, and namely in the Eurozone, together with the effects of globalisation, has an impact on the Czech economy. According to economic analysts, the gross domestic product in the Czech Republic will only increase by 1.9% in 2021.
As a result, many Czech people reassessed their approach to financial tools. The question is, where to deposit money so that it generates income? Putting your money into a saving account won’t cover even half of the current inflation. This is why people are looking for ways to stop the depreciation. Financial institutions, banks and the Czech Statistical Office have reported a significantly higher interest in bonds in the last weeks of 2021.
Corporate or state bonds?
It is clear that Czechs turned their attention to the bond market, as it offers a relatively safe way to invest and is therefore suitable even for more conservative investors. Most people are interested in corporate bonds of various types, where the income exceeds the inflation rate. Most commonly investors buy issues from companies operating in energy, financing, construction and real estate whose activities convinced investors about the acceptability of the investment risk. Corporate bonds usually have a maturity of 2 to 3 years and the average revenue is around 8% p.a.
In terms of government bonds, we can only recommend the so-called “anti-inflation government bonds of the Czech Republic”. These cover the inflation rate and offer the holder sufficient protection against inflation. On the other hand, you shouldn’t expect more significant income. The maturity date is 6 years.