(Adds Czech finmin comments)
By Martin Dokoupil and Richard Barley
LONDON/PRAGUE, June 3 (Reuters) - The Czech Republic sold a
much bigger-than-expected 2 billion euro ($3.1 billion) eurobond
on Tuesday in the first sovereign issue in the region since the
credit crunch rattled international markets last year.
The 10-year paper was priced at 25 basis points above
mid-swaps, at the tighter end of guidance. The issue marks the
Czechs' return to the international debt market for the first
time since 2005 as domestic borrowing costs rise.
Orders for the 5.0 percent 2018 paper 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 intention to raise around 1 billion.
Finance Minister Miroslav Kalousek said that high investor
interest allowed for the bigger size, which ruled out another
foreign issue this year [].
"Investor interest was much higher than I had dared to hope
... I ordered to raise the volume to 2 billion euros, from the
planned 1 billion," Kalousek told Reuters in parliament. "This
is such a high volume that I do not expect to repeat such an
operation this year."
Deputy Finance Minister Eduard Janota said the government
could not obtain so much funding at home at the same pricing,
but some in the market said they had expected an even tighter
spread.
"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 paper in Hungary <0#HU028481071=>
and Poland <0#PL021031429=> stood 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.
Barclays Capital and Deutsche Bank managed the sale.
SUPPORT FOR DOMESTIC MARKET
The ministry had said a eurobond issue would be hedged in
order to prevent upside pressure on the crown currency.
Czech domestic spreads have risen in the past months, adding
support to the ministry's plans to issue abroad.
The ministry has set a 165-185 billion crown full-year
medium and long-term borrowing target on both domestic and
foreign markets.
Traders said local spreads could narrow slightly as the
state will have less 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 []
(Additional reporting by Petra Vodstrcilova)
(Editing by Gerrard Raven)
