Strong demand helps cut yields on Czech bonds at latest auction

By bne IntelliNews September 18, 2014

The Czech finance ministry sold CZK 10bn (EUR 363mn) in 2018 and 2027 government bonds at an auction on September 17, below the maximum planned amount of CZK 13bn, the central bank said.

The ministry sold CZK 5bn of the four-year bond that carries a fixed annual coupon of 0.85% and matures on March 17, 2018, the same as the amount sold at the previous auction of the paper held in May. Investors’ demand strengthened to CZK 18.3bn from CZK 8.7bn helping cut the average annual yield fell to 0.212% from 0.464% in May. This was the fourth tranche of the issue.

The ministry also sold CZK 5bn of a 13.5-year bond that matures on November 19, 2027 and carries a floating interest rate, the same as in the previous auction held in June. The issue lured bids of CZK 13.9bn, up from CZK 8.7bn at the June auction. The average discount margin fell to -3.430bps from 8.293bps. This was the third tranche of the issue.

The ministry was planning to sell between CSK 3bn and CZK 5bn of the four-year bonds and between CZK 5bn and CZK 8bn of the floater.

The ministry held no bond auctions in July and August partly due to strong budget revenues that helped the budget ran surpluses up to end-July.

Bonds with a maximum nominal value of CZK 40bn will be offered for sale in the fourth quarter of 2014, up from CZK 20bn planned for the third quarter.

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