Czechs receive poor bids in debut 15-yr debt sale

...investors shunned the sale amid a weaker domestic currency and bearish global environment.

The government sold 3.695 billion crowns ($172.5 million) worth of the 4.70 percent note due September 2022 , well short of the 5.95 billion offered, at an average yield of 4.82 percent, in the first round of the auction.

The sale attracted just 4.995 billion crowns worth of bids. Demand was much poorer than in last week's auction of the 10-year government bond, when it reached nearly 4 times the sold amount, one of the strongest results ever in a Czech bond sale.

It was the first time in a year that banks had bid for less than the amount on offer in the first auction round.

"This is a negative surprise, a total opposite of the surprise result from last week," said Petr Kaspar, debt trader at Ceska Sporitelna in Prague. "The sentiment is bearish."

The news of the auction failing to lure enough bidders augmented a rise in secondary market debt yields , which generally rose more than 5 basis points on the day on long-dated paper.

Czech debt is the most richly priced in central Europe, with local yields trading below or very close to the euro equivalents to reflect a gap between domestic rates and higher euro zone benchmarks and anticipation of euro adoption in the next decade.

The launch of the new long-term bond benchmark came against the backdrop of a surge in global debt yields to multi-year highs on investor concerns that global interest rates will have to rise in the face of strong growth and resurgent inflation.

Last month's first interest rate hike in 8 months by the Czech central bank (CNB) and a weakening in the crown to 9-month lows against the euro have also depressed the domestic fixed-income markets in past weeks, sending debt yields to multi-year peaks.

Markets are betting the CNB may raise benchmark credit costs by another quarter-point to a near 5-year high of 3.0 percent as early as July, as inflation nears a 3 percent goal and household spending surges at the fastest rate in more than 3 years. TABLE ON AUCTION RESULT.........................[ID:nPRA001347]