PRAGUE, Feb 18 (Reuters) - The Czech Republic sold less than
half of the 10 billion crowns it offered in its 8-year, floating
rate bond auction on Wednesday, signalling tougher times as the
price of risk in central Europe rises.
Central Europe's bond markets have been hit in the last week
as currencies tumbled on worries about the region's economies
and a heavy reliance on foreign debt.
Concern also grew after two agencies said on Tuesday that
the credit ratings of emerging European banks and their western
owners could suffer in the recession.
(For details please double click on [])
These reports sparked a selloff in markets -- hitting the
short end of the Czech yield curve.
"It was absolutely a disaster," a Prague fixed income
trader, who asked not to be named, said of the tender. A sharp
rise in credit default swap prices had dented demand, he added.
The Finance Ministry sold a total 4.63 billion crowns' worth
of 8-year government bonds <CZ1002331=> at Wednesday's auction,
producing an average yield of 126.401 basis points above the
six-month Prague interbank rate (PRIBOR) rate of 2.57 percent.
The ministry had set the bond's coupon at 4.28 percent, the
PRIBOR rate from Oct. 22 when the inaugural auction took place.
The spread between the minimum and maximum yield widened to
93-155 basis points above PRIBOR, from 55-78 basis points.
Bids totalled 6.6 billion crowns, down from more than 9
billion at an auction last month.
Czech 5-year CDS has jumped about 100 basis points to around
350 basis points this month, according to Markit data on the
Reuters system.
The Czech Republic halted a planned eurobond issue this
month when CDS prices were 250 basis points, which roughly
translates into an issue price of an equal amount over
mid-swaps.
A deputy finance minister told Reuters at the time that the
price was too high and would damage local markets. The country
issued a eurobond last June at 25 basis points over swaps.
The government approved on Monday a stimulus plan worth
around 1.9 percent of gross domestic product, including some tax
cuts which have already been implemented, to ease the impact of
the accelerating global economic crisis. []
"You could also say the deteriorating fiscal outlook and the
fact that they will have to finance much more than previously
anticipated played a role (in today's auction), as well," said
Anne-Francoise Bluher, a fixed income analyst at Komercni Banka.
Debt markets have been crowded due to euro zone countries
issuing debt to fund their own stimulus packages.
The Czech Republic halted most bond issues in October when
debt markets were hammered by the global financial crisis, but
has since seen decent demand in five auctions for the floater.
The ministry plans another floater auction next month and
will also auction a new 10-year, fixed rate bond.
Hungary tested markets last week with its first auctions
since October, but plans no more bond issues in March-May.
For a table with details of the auction click on
[]
(Reporting by Jason Hovet; editing by David Stamp)
