Investment outlook: government bonds beat inflation


Pardox: the economy is doing better than expected, but stock prices are going down. We are talking about the United States. America achieved relatively strong growth in domestic product in the third quarter, and the labor market there was in surprising shape.

However, the central bank has been keeping interest rates high for a long time with the aim of cooling the economy and reducing inflation. That is why she did not even indicate that she would like to lower rates in the foreseeable future. However, each month with high interest rates will hurt consumers and businesses alike.

The other important central banks did not move their rates in October either, but they also let it be known that the period of high rates is far from over.

In addition to the strict monetary policy of the central banks, the development of the markets was also influenced by a policy without attributes: the conflict in the Middle East increases the riskiness of investing in shares.

Add in the disappointing results of some major technology companies and we have the reason why stocks as a whole have weakened and why the performance of stock mutual funds is also declining.

Partners stock fund indexes

funds investing in shares of developed countries

funds investing in underdeveloped countries and other special strategies (fringe markets, individual sectors, etc.)

October 2023



since the beginning of the year






3 years



5 years



10 years



Number of funds



The average performance of koruna globally diversified equity funds offered in the Czech Republic was in the red in October – roughly 2.9 percent. Over the past 12 months, investors are still in the red by an average of 5.6 percent. This follows from the Partners Index of Funds (PIF) for October.

A group of specially targeted equity funds, which focus on either specific regions or sectors, reported a positive performance of 0.6 per cent in October, in contrast to funds focused on major markets. The main reason for the different performance of this group of funds is the good results of funds specialized in Central and Eastern Europe, including Czech shares. The Czech Stock Exchange added 1.2 percent in October, while the global stock index fell by 3 percent.

Partners bond fund indexes

funds with government and quality corporate bonds

funds with investments in risky and speculative bonds

October 2023



since the beginning of the year






3 years



5 years



10 years



Number of funds



After several months of growth, the yields of Czech government bonds went downwards, which helped to push their prices, on the contrary, higher. The main reason for the decline in long-term yields was rapidly falling inflation. It has already climbed to 6.9 percent year-on-year.

Today, statisticians will announce significantly higher year-on-year inflation, but it is more of an artificial number than a real economic indicator: the calculation will reflect last year’s introduction of an energy-saving tariff.

According to the latest forecast of the central bank, we can look forward to inflation below three percent from the beginning of next year. At the last monetary meeting of the Czech National Bank, two bankers even voted in favor of reducing the base rate from 7 percent by a quarter of a percent. But not even two swallows make spring yet.

The yield on ten-year government bonds decreased to 4.7 percent, which means that if the forecast of the Czech National Bank is correct and inflation falls below three percent at the beginning of the year, government bonds will outperform it. Shareholders of bond funds can enjoy the future real appreciation of their conservative reserves.

The average appreciation of bond funds over the last month was 1 percent. Over the past 12 months, conservative funds are up 8.2 percent. However, due to the growth of risk premiums, which goes hand in hand with fluctuations in the stock markets, riskier bonds lost and ended in October with a negative evaluation of one tenth of a percent below zero. Year-on-year, they are higher by 8.6 percent.

Partners index of mixed funds

October 2023

– 0.9%

since the beginning of the year




3 years


5 years


10 years


Number of funds


Mixed funds in line with share prices have seen negative performance. Their average value fell by 0.9 percent month-on-month, and they are in profit by 5.3 percent year-on-year.


Martin Masat

Portfolio manager at Partners investment company. He graduated from the University of Economics and the Institute of Economic Studies at Charles University. He holds the prestigious international title of CFA (Chartered Financial Analyst)…. More articles by the author.

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