(Bloomberg) -- The Czech Republic is challenging Switzerland as the country with the world’s lowest yields, at least on shorter-maturity bonds.

The rate on the former communist nation’s two-year notes fell to a record low of minus 0.94 percent at one point on on Tuesday, seven basis points below Switzerland. It has since risen back above the Swiss yield.

Demand for Czech bonds is being driven by the country’s growing economy, a virtually balanced state budget, relatively low public debt and central bank purchases of foreign currencies that are flooding the market with fresh koruna liquidity. Foreign investors have been snapping up mainly the shorter maturities in the hope of benefiting from koruna gains once central bankers remove their three-year-old cap on the exchange rate.

Czech two-year yields were up two basis points at minus 0.89 percent as of 10:02 a.m. in Prague, while the rate on similar-Swiss notes fell three basis points to minus 0.97 percent. The yield on benchmark two-year German securities was minus 0.67 percent.

--With assistance from Marton Eder To contact the reporter on this story: Krystof Chamonikolas in Prague at To contact the editors responsible for this story: Alex Nicholson at, Stephen Kirkland, Andrea Dudik

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