The prices of debt securities fell in the context of the recent increase in interest rates in most of the countries of the CNB’s geographical investment area. At the same time, the unstable geopolitical situation and fears of a recession in major world economies are also leading to a decline on stock markets. The two asset classes usually display a negative correlation, i.e. when the bond market declines, the stock market rises and vice versa. However, we are currently experiencing a simultaneous drop in the prices of both types of assets, which is negatively affecting the market value of the CNB’s international reserves. As a result, the CNB’s income and expenses are also expected to be negatively affected in 2022.
Table 1 – International reserves
| Market Value | Average return in reserve currencies, p.a. | ||||
|---|---|---|---|---|---|
| EUR mil | Share | 5 years | 3 years | 1 year | |
| Liquidity tranche | 34 647 | 26.4% | n/a | −0.23% | −0.30% |
| Investment tranche | 96 651 | 73.6% | n/a | 0.68% | −6.40% |
| Total | 131 298 | 0.59% | 0.05% | −4.65% | |
Table 2 – Division of the international reserves by investment instrument
| Type of investment | Share |
|---|---|
| Bonds | 58.7% |
| – government | 43.0% |
| – government agencies | 8.4% |
| – supranational issuers | 3.7% |
| – MBS and covered bonds | 3.5% |
| Money market instruments | 25.9% |
| Equities | 15.1% |
| Other | 0.3% |
Table 3 – Currency allocation of the international reserves
| Currency | Share |
|---|---|
| EUR | 52.4% |
| USD | 28.1% |
| CAD | 7.6% |
| AUD | 3.8% |
| GBP | 3.3% |
| CNY | 1.7% |
| JPY | 1.4% |
| SEK | 1.0% |
| SDR | 0.4% |
| gold | 0.4% |
| other currencies | 0.0% |
Explanatory notes:
- The average return in reserve currencies p.a. is calculated as the weighted average of the returns on portfolios in the currencies of the respective portfolios; the weights are the ratios of the portfolios’ market value to the total;
- Five years, three years and one year are moving periods, i.e., for example, a one-year period contains data for the last four quarters.
- Bonds are broken down into four major categories:
- bonds issued by governments,
- bonds of government agencies, i.e. issuers with a close relationship with the central government, whose liabilities are usually explicitly guaranteed by the government,
- supranational issuers include, for example, the BIS, IBRD, EBRD, EIB, etc.,
- MBS bonds and covered bonds are mortgage-backed bonds (bonds guaranteed by selected US agencies – MBS or covered bonds typically issued in Europe).
- Other is the sum of the market value of gold and derivative positions, for example, positions in futures contracts, interest rate and FX swaps, etc.