* Demand beats previous auctions, prices steady
* Investor appetite seen strong, but caution ahead
(Adds top-up round, comments, details)
By Jason Hovet
PRAGUE, April 15 (Reuters) - Investors jumped on the Czech
Republic's new 3-year, floating-rate government bond in an
inaugural auction on Wednesday as improved sentiment for central
European assets continues to boost debt sales.
The Finance Ministry sold 8.5 billion crowns ($420.8
million) worth of the paper <CZ1002505=>, with bids totalling
26.1 billion crowns, surpassing the planned offer of 8 billion
crowns more than three times.
Demand passed previous auctions, and dealers and analysts
said the government could likely count on robust investor
appetite -- mainly from local funds -- in coming months.
"This bond is surely sexy only for locals," one dealer said.
"What I read from the results is the ministry does not want to
sell bonds for everything, although investor appetite is huge."
The Czechs have lifted their borrowing pace in the past
month after going slow since the global financial crisis
devastated central Europe's debt markets last autumn. They sold
a third more than planned in March, but at rising yields.
Wednesday's auction produced an average yield of 91.54 basis
points above the six-month PRIBOR interbank rate of 2.69
percent, with the highest accepted yield at 99 basis points. The
ministry had earlier set the semi-annual coupon at the six-month
PRIBOR rate plus 100 basis points.
An auction of a 4.1 percent coupon, fixed rate bond due 2011
<CZ1002158=> was sold last month with an average yield of 3.7
percent, down from 4.828 percent at an auction last year when
official interest rates were 200 basis points higher.
The same paper traded at 100.25/101.75 on Wednesday,
yielding 3.965/3.171 percent, in line with floater prices.
Czech bond prices on secondary markets have stabilised
somewhat this month after previous falls as a rebound in global
equities and G20 pledges to make more resources available for
emerging markets lifted appetite for riskier assets.
In Poland, which is set to tap the International Monetary
Fund's new flexible credit line, demand has jumped in the past
month with recent auctions being several times overbid.
At the same time, analysts said worries about political
overspending following the collapse of Czech Prime Minister
Mirek Topolanek's centre-right cabinet partially subsided.
The main parties agreed last week on a spending package
worth 1.1 percent of gross domestic product, which analysts said
was less than some investors may have feared.
However, Komercni Banka fixed income analyst Anne-Francoise
Bluher, said weakening was likely in the run-up to early
elections in October as chances of increased spending and
financing grow, while investor sentiment still remained fragile.
"We stick to our view that later this year (Czech bonds)
will cheapen," she wrote in a Wednesday report.
"We doubt that the actual improving market situation and
economic stabilization means that we are out of the crisis for
good; there is a significant probability that risk aversion may
surge again later this year."
She added that now was a good time for a Eurobond issue --
something the Czech Finance Ministry had passed on in February
when credit risk prices rose to records in central Europe.
For a TABLE on Wednesday's auction, click on []
(Reporting by Jason Hovet; Editing by Andy Bruce)
