(Repeats story published late on Tuesday)
By Jason Hovet
PRAGUE, Oct 21 (Reuters) - The Czech Finance Ministry will
test a new 8-year, floating-rate bond on investors at an auction
on Wednesday, its only expected long-term debt sale in the next
few months on the frozen debt market.
The Czechs, along with other regional governments, have cut
back planned issues over the past month after secondary markets
came to a near standstill as buyers disappeared and funds looked
to sell in a hunt for cash.
However, market participants said demand for the new issue
may be solid, although players say pricing the bond could prove
tricky.
"I would expect there will be quite a demand... The pricing
might be very interesting given the stress on the market," a
Czech fund manager said.
"It's a question whether the Finance Ministry will be
willing to sell this floater at (higher) levels. If yes, it
would be quite a signal for the market, and in that case bonds
might be under pressure because it means that they are willing
to sell at almost any price."
Market players expect the bond to yield around a 50 basis
point premium over the Czech interbank rate PRIBOR.
The six-month PRIBOR <> rose to 4.26 percent on
Monday, from 3.69 percent on Sept. 15, the day U.S. investment
bank Lehman Brothers filed for bankruptcy protection, escalating
the year-old global credit crunch.
The Czech bond market has seized up over the past month,
with market makers afraid to quote as an oversupply hangs from
funds wanting to sell to raise cash.
The Czech central bank introduced a new repo facility that
takes government bonds as collateral to boost liquidity in the
market, and Vice-Governor Miroslav Singer said the bank could
take up market-making duties in a worst case scenario.
However, dealers say the main problem is the lack of buyers.
Falling demand has hit other markets, with Hungary annoucing
plans earlier this month to scale back debt sales by 200 billion
forints over the rest of the year.
On Monday, Poland said it would cut its debt supply in
November and December due to a lower-than-expected budget
deficit.
The impact has also been felt in Slovakia, although the
country's planned euro zone entry next year has limited the
global financial crisis' impact on its bond auctions.
The Czech Republic sold 2 billion euros of Eurobonds earlier
this year, and this combined with a reduced budget deficit has
cut its financing needs.
"The Czech Finance Ministry is in a better position compared
with Hungary because their funding needs are low," Citigroup
analyst Jaromir Sindel said.
The Finance Ministry has canceled two planned auctions in
the past month, and Deputy Finance Minister Eduard Janota has
said the country will hold off on fixed-coupon issues for one to
two months.
(Editing by Andy Bruce)
