UPDATE 1-Czechs score success with debut 30-year bond

(Adds further analyst quotes, market reaction, background)

By Marek Petrus

PRAGUE, Nov 29 (Reuters) - The Czech Republic raised the sale of a debut 30-year government bond on Wednesday in what market players said was a very successful launch of the longest-maturity debt among central European governments.

The notes, maturing December 2036, yielded 4.22 percent on average.

That was at par with the equivalent note issued by euro zone member Greece, rated at 'A1' by Moody's like the Czech Republic, a European Union member which aspires to euro adoption.

The Czech government borrowed 12.3 billion crowns ($579.9 million) through the first, competitive round of an auction, after investors' bids reached nearly treble the original 8 billion amount of paper on offer.

"The auction was a big success," said Daniel Kozel, senior portfolio manager at PPF Asset Management in Prague.

Market sources said domestic investors and foreign players building exposure to euro zone candidate countries in central Europe snapped up about equal parts, with overall demand reaching 22.4 billion crowns, or 1.82 times the accepted bids.

The result helped boost prices of other long-term Czech government debt, knocking yields as much as 4 basis points lower. Secondary market quotations after the auction priced the newly-launched bond to yield 4.20/4.17 percent <CZ1001796=>.

'STRONG CONVERGENCE PLAY'

In lengthening the benchmark local currency yield curve, the Czechs will top regional peers, Poland and Slovakia, which have already raised 20-year debt domestically <PL20YT=RR><SK20YT=RR>.

Previously, the longest-dated Czech bond was issued with 15 year maturity in 2005.

The 30-year bond sale attracted investors betting on long-term yield convergence because its pricing was offering a certain premium to euro zone equivalents, considering that the country was set to join Europe's single currency some time after 2010.

The new Czech debt was priced slightly cheaper than Italy's 30-year note <IT30YT=RR>, yielding 4.21 percent. The Greek paper <GR30YT=RR> traded at a yield of some 4.22 percent on Wednesday, nearly 40 basis points above the euro zone benchmark <EU30YT=RR>.

"(This) fact ... helped spur foreign demand as the Czech Republic is seen as strong convergence play, and hence yields in the long end are expected to converge to similar duration bonds on the benchmark bund curve," said 4Cast consultancy in London.

The new bond helps the Czechs step up domestic borrowing to fund a fiscal gap, following a decision to refrain from foreign borrowing after issuing 30-year, Japanese-yen denominated bonds in January in a private placement.

With the sale, the Czechs are joining a list of European governments which have issued bonds with maturities of up to 50 years to cater to rising demand from pension funds seeking to hold sufficiently long-dated assets to cover future payments.

((For TABLE detailing auction results, double click on [ID:nL29121760]))

((Editing by Gerrard Raven; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477)) ($1=21.21 Czech Crown) Keywords: CZECH BONDS/