Czech foreign bond unlikely in 2006- Deputy FinMin

PRAGUE, Oct 13 (Reuters) - The Czech Republic will likely refrain from any further foreign borrowing this year, and issue domestic bonds if needed to raise extra funding, Deputy Finance Minister Bohdan Hejduk said.

"Another foreign issue is not very likely," Hejduk told Reuters. "There is not much time left to prepare one before the year-end," he added in an interview late on Thursday.

The ministry has been mulling ways to cover a projected 18.8 billion crown ($836 million) hike in the government's funding requirements to meet unplanned payments before the year-end.

Finance Minister Vlastimil Tlusty will have a final say and ministry officials expect him to decide in the coming weeks.

Borrowing abroad would run counter to the ministry's pledge to refrain from tapping foreign markets for the rest of 2006, after issuing 30 billion ($251 million) of 30-year bonds in January in a private placement.

A ministry official told Reuters on Tuesday, on condition he would not be named, that the ministry might consider adding one or two medium- or long-dated bond auctions to the fourth quarter calendar if it boosted local currency borrowing.

The ministry has previously scheduled auctions offering 44 billion crowns' worth of medium- and long-term domestic bonds between October and December. It usually auctions 5-8 billion crowns worth of paper in one go.

The ministry prefers longer-dated bond borrowing, rather than short-term refinancing through Treasury bills with a maturity of up to one year, to try and meet its long-standing goal of lengthening the average maturity of state debt.

But investors have been uneasy about the domestic market's ability to absorb the rising supply of government bonds, fed by a burgeoning fiscal deficit.

Hejduk said the country could always return to international debt markets when it sees fit.

"In the future, foreign bond issues cannot be ruled out. But it would require the right time and the right market," he said. ((Reporting by Marek Petrus; Editing by Chris Pizzey; 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))

Keywords: MARKETS CZECH BONDS