(Adds traders' comments, background)
By Richard Barley and Martin Dokoupil
LONDON/PRAGUE, June 3 (Reuters) - The Czech Republic sold a
benchmark 10-year eurobond on Tuesday worth 2 billion euros
($3.1 billion), more than expected, which traders said could
revive the weak domestic market.
The paper will bear a coupon of 5.0 percent and its issue
marks the Czech return to the international debt market for the
first time since 2005 as domestic borrowing costs rise.
The eurobond was priced to yield mid-swaps plus 25 basis
points, at the lower end of a 25-30 basis-point range.
Orders reached just under 3 billion euros, an official at
one of the banks managing the sale said. The size of the deal is
double the initial finance ministry's intention to raise around
1 billion.
"The size is bigger than expected. But I could imagine even
better pricing ... 5-10 (basis) points lower," said Ondrej
Vavra, portfolio manager at PPF Asset Management in Prague.
The paper was priced 68 basis points over the January 2018
German Bund <0#DE113534=>.
The issue's swap spread is 15 basis points higher than in
Italy or Greece, Ceska Sporitelna said in a report ahead of the
final pricing.
Swap spreads on comparable papers in Hungary
<0#HU028481071=> and Poland <0#PL021031429=>, stand at 55.7 and
44.9 basis points, respectively, according to Reuters data.
The Czech domestic 10-year bond <CZ10YT=RR> traded to yield
5.097/045 percent, 69 basis points above the corresponding Bund
and 45 basis points above local swaps.
Czech domestic spreads have risen in the past months, adding
support to the ministry's plans to issue abroad.
The ministry has said a eurobond issue would be hedged in
order to prevent upside pressure on the crown currency.
Barclays Capital and Deutsche Bank managed the sale.
NO MORE EUROBONDS
The Finance Ministry had no immediate comment on the issue
but traders said it was not likely to tap foreign markets with
another Eurobond issue this year, although it still has room in
its debt strategy seeing up to 89.9 billion crowns ($5.64
billion) worth of foreign borrowing.
"The situation would have to get significantly worse on the
domestic market to issue another eurobond, which I do not expect
after this successful eurobond issue," said Komercni banka
trader Dalimil Vyskovsky.
The ministry has set a 165-185 billion crown full-year
medium and long-term borrowing target on both domestic and
foreign markets.
Traders also said local spreads could narrow slightly as the
state will have a lower need to place debt after the latest
Eurobond placement.
The Czechs have issued two eurobonds so far, a 10-year note
<CZ019495752=> due 2014 and a 15-year <CZ021515329=> note due
2020.
The Czech Republic is rated A1 by Moody's Investors Service,
A by Standard & Poor's and A+ by Fitch Ratings.
For issue terms click on []
(Reporting by Richard Barley and Martin Dokoupil; writing by
Martin Dokoupil; Editing by Ron Askew)
