Czech Finance Ministry Hires Banks to Sell Eurobonds in the `Near Future'

The Czech Republic is restarting a delayed sale of bonds in euros to cover its record funding needs as 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 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 268 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.

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.

To contact the reporters on this story: Sonja Cheung in London at scheung58@bloomberg.net; Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

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