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Czechs Revive Eurobond Sale as Yields Fall on Deficit
September 03, 2010, 11:34 AM EDT
By Sonja Cheung and Krystof Chamonikolas
(Adds issue size estimate, rating from seventh paragraph.)
Sept. 3 (Bloomberg) -- The Czech Republic is restarting a delayed sale of bonds in euros to cover its record funding needs after planned austerity measures and optimism about emerging- market debt sent borrowing costs to a record low.
The government hired Barclays Capital, Ceska Sporitelna AS and Deutsche Bank AG to arrange the debt offering “in the near future,” the Finance Ministry said in a statement today.
Czech bonds have rallied in the past two months, pushing the yield on the benchmark 2019 koruna note to a record low of 3.164 percent last week, after the government pledged to halve its fiscal deficit in three years and investor demand for emerging-market bonds revived on an outlook for faster economic growth and lower public debt levels than in developed nations.
“Financing conditions are now better than in the spring as concern about heavily indebted euro-zone countries is abating, which has also reduced the risk premium for central Europe’s countries,” Vojtech Benda, a Prague-based economist at ING Bank NV, said by phone today. “It was worth the wait.”
The country delayed an issue of at least 1 billion euros ($1.28 billion) of debt in April as concern Greece might default drove up borrowing costs across Europe. JPMorgan Chase & Co.’s EMBI+ Index shows the extra yield demanded by investors to hold emerging-market debt rather than U.S. Treasuries has fallen to 274 basis points today from a 354.7 basis-point spread on May 25, when the euro sank to its lowest since 2001 against the yen on concern the European debt crisis would spread.
Borrowing Needs
Czech borrowing needs jumped to 280 billion koruna ($14.5 billion) this year as the European Union country is recovering from its deepest recession in two decades, hurting tax revenue and boosting social spending. Finance Minister Miroslav Kalousek said last month the government must tap foreign markets later this year as it cannot raise enough funds domestically.
The ministry said this week it will offer 30 billion koruna of local bonds in the last quarter, the smallest amount this year, and will cut Treasury-bill sales to a third of the target for this quarter. The numbers indicate that the ministry counts on a foreign-currency issue worth about 1.5 billion euros, said analyst Anne-Francoise Bluher at Komercni Banka AS in Prague.
Prime Minister Petr Necas’s cabinet, which took office in July, has pledged to cut the fiscal gap to within the EU’s limit of 3 percent of economic output by 2013 from 5.9 percent last year. Standard & Poor’s said on Aug. 10 it may raise the Czech credit rating if the government follows through on its promises, including an overhaul of the pension system.
Auctions Oversubscribed
Government borrowing costs declined to a record low at a sale of five-year koruna bonds this week as investors bid for 2.5 times the amount offered. Auctions of 15-year and three-year notes in August were also more than twice oversubscribed and the average accepted yields fell to the lowest for the securities.
Demand for Czech sovereign debt has improved since the government “at least verbally showed a clear commitment to reduce the deficit” and S&P upgraded the country’s credit outlook to positive, Benda said. “It is now clear that Czech sovereign debt is safer than that of some euro-zone countries, such as Greece, Spain or Portugal.”
Default Swaps
Public debt will reach 85 percent of economic output in the 16-nation euro area, compared with 79 percent in Hungary, 54 percent in Poland and 40 percent in the Czech Republic, European Commission estimates show. Czech sovereign debt is rated A1 at Moody’s Investors Service, its fifth-highest investment grade and on par with euro-area’s Portugal and Slovakia.
The yield on the 2019 note advanced 8 basis points today to 3.358 percent as of 5:33 p.m. in Prague. The cost of protecting government debt against default with credit-default swaps was 95 basis points yesterday. This compared with default-swap levels of 121 for Belgium, 139 for Poland, 202 for Italy, 212 in Spain, 350 for Hungary and 879 in Greece, CMA DataVision data show.
The koruna, the world’s second-best performing currency after the Swiss franc in the past three months, was little changed today at 24.705 per euro.
***
Piccolo OT (un'eccezione) però ne abbiamo parlato.
September 03, 2010, 11:34 AM EDT
By Sonja Cheung and Krystof Chamonikolas
(Adds issue size estimate, rating from seventh paragraph.)
Sept. 3 (Bloomberg) -- The Czech Republic is restarting a delayed sale of bonds in euros to cover its record funding needs after planned austerity measures and optimism about emerging- market debt sent borrowing costs to a record low.
The government hired Barclays Capital, Ceska Sporitelna AS and Deutsche Bank AG to arrange the debt offering “in the near future,” the Finance Ministry said in a statement today.
Czech bonds have rallied in the past two months, pushing the yield on the benchmark 2019 koruna note to a record low of 3.164 percent last week, after the government pledged to halve its fiscal deficit in three years and investor demand for emerging-market bonds revived on an outlook for faster economic growth and lower public debt levels than in developed nations.
“Financing conditions are now better than in the spring as concern about heavily indebted euro-zone countries is abating, which has also reduced the risk premium for central Europe’s countries,” Vojtech Benda, a Prague-based economist at ING Bank NV, said by phone today. “It was worth the wait.”
The country delayed an issue of at least 1 billion euros ($1.28 billion) of debt in April as concern Greece might default drove up borrowing costs across Europe. JPMorgan Chase & Co.’s EMBI+ Index shows the extra yield demanded by investors to hold emerging-market debt rather than U.S. Treasuries has fallen to 274 basis points today from a 354.7 basis-point spread on May 25, when the euro sank to its lowest since 2001 against the yen on concern the European debt crisis would spread.
Borrowing Needs
Czech borrowing needs jumped to 280 billion koruna ($14.5 billion) this year as the European Union country is recovering from its deepest recession in two decades, hurting tax revenue and boosting social spending. Finance Minister Miroslav Kalousek said last month the government must tap foreign markets later this year as it cannot raise enough funds domestically.
The ministry said this week it will offer 30 billion koruna of local bonds in the last quarter, the smallest amount this year, and will cut Treasury-bill sales to a third of the target for this quarter. The numbers indicate that the ministry counts on a foreign-currency issue worth about 1.5 billion euros, said analyst Anne-Francoise Bluher at Komercni Banka AS in Prague.
Prime Minister Petr Necas’s cabinet, which took office in July, has pledged to cut the fiscal gap to within the EU’s limit of 3 percent of economic output by 2013 from 5.9 percent last year. Standard & Poor’s said on Aug. 10 it may raise the Czech credit rating if the government follows through on its promises, including an overhaul of the pension system.
Auctions Oversubscribed
Government borrowing costs declined to a record low at a sale of five-year koruna bonds this week as investors bid for 2.5 times the amount offered. Auctions of 15-year and three-year notes in August were also more than twice oversubscribed and the average accepted yields fell to the lowest for the securities.
Demand for Czech sovereign debt has improved since the government “at least verbally showed a clear commitment to reduce the deficit” and S&P upgraded the country’s credit outlook to positive, Benda said. “It is now clear that Czech sovereign debt is safer than that of some euro-zone countries, such as Greece, Spain or Portugal.”
Default Swaps
Public debt will reach 85 percent of economic output in the 16-nation euro area, compared with 79 percent in Hungary, 54 percent in Poland and 40 percent in the Czech Republic, European Commission estimates show. Czech sovereign debt is rated A1 at Moody’s Investors Service, its fifth-highest investment grade and on par with euro-area’s Portugal and Slovakia.
The yield on the 2019 note advanced 8 basis points today to 3.358 percent as of 5:33 p.m. in Prague. The cost of protecting government debt against default with credit-default swaps was 95 basis points yesterday. This compared with default-swap levels of 121 for Belgium, 139 for Poland, 202 for Italy, 212 in Spain, 350 for Hungary and 879 in Greece, CMA DataVision data show.
The koruna, the world’s second-best performing currency after the Swiss franc in the past three months, was little changed today at 24.705 per euro.
***
Piccolo OT (un'eccezione) però ne abbiamo parlato.
Sono tornato anch' io.
