Work detail

Bond Market in the Czech Republic - Analysis Using and Comparing Different Economic Views

Author: Mgr. Anna Dvořáková, PhD.
Year: 2003 - summer
Leaders: † prof. Ing. Michal Mejstřík CSc.
Work type: Dissertations
Language: Czech
Pages: 109
Awards and prizes:
Abstract: In this paper the author focuses on the bond market in the Czech Republic. The work analyses the local bond market from different points of view: macroeconomic, microeconomic, institutional, historical, and current "financial".
The analysis starts with terminology -- the first chapter compares the legal and market usage of terms "dluhopis" and "obligace". It also brings historical definitions and compares the Czech terminology with English one (used e.g. by Frank Fabozzi and BasisPoint).
The chapter based on the macroeconomic view analyses the fundamental of bonds. Traditionally, bonds have been understood as investments-- i.e. an alternative to money. The chapter shows that the character of bonds is not so simple. Further, the chapter indicates an impact of different macroeconomic indicators and problems with their interpretation.
The chapter following microeconomic topics stems from creation bond prices and their estimations. The chapter shows results of a research among bond traders, distortions of market analytics´ estimations based on BIG Expert data, intra-day volatility of bond prices, volatility of credit spreads and other results. It is clear that there are anomalies on the market such as a very high correlation of estimations with simultaneous figures and movement of credit spreads.
The institutional view stresses the importance of a proper and complex institutional background. It applies the model Inside-Across-Around (based on the Asian experience) to the environment of the Czech Republic and shows the problematic areas and possible solutions. Furthermore, the chapter focuses on changes connected to the single currency -- the euro. What changes the euro has brought to bond markets and what changes can be expected in the Czech Republic after it enters the EU and EMU.
Historical roots of bonds and bond market institutions are described in the chapter on historical development of bonds and bond markets in the area of the Czech Republic. It starts in the Hapsburg monarchy, continues with the "First" Republic and the socialist era, and ends with modern history (since the introduction of the Czech Republic -- the beginning of the 90´s). There were very similar instruments and even yields one hundred years ago. Further, there were perpetuities and lottery bonds in the monarchy and several other differences. The chapter also shows how many changes there were in laws concerning the capital market, bond taxation and auctions in the last ten years.
The last chapter analyses the current situation on the local bond market. It compares bonds with other instruments of public and private financing (e.g. loans and shares). Further, it compares the local bond market (its size and structure) with other European bond markets.
Although the structure seems to be almost standard compared to Western Europe, the overall size is rather small. Bonds are not a very important instrument for financing of the private sector, but they play a crucial role in managing of the state debt.

The above-mentioned economic views draw a colourful picture of one economic problem. In some situations, the different views smoothly fade into one another, enrich or deepen themselves. On the other hand, there are also sections where a synthesis or cohesion is rather difficult. However, using and comparing different economic views can be very helpful in getting the complete picture of many economic problems.
Downloadable: Dissertation Thesis - Dvořáková
June 2023


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