Czech Yields to Hit Five-Month High at Bond Sale Today on Global Recovery

The Czech Republic’s borrowing costs may rise to the highest level since July at a bond sale today as speculation the economic recovery is gathering pace reduces demand for the government’s debt.

The notes maturing in September 2015 are likely to be sold at an average yield of about 2.95 percent, according to analysts at Komercni Banka AS and Raiffeisenbank AS in Prague. That would be the highest since July 14 when the yield reached 3.001 percent, data compiled by Bloomberg show. The rate was 2.623 percent at the last auction of the same securities on Oct. 6.

Stocks and commodities rallied yesterday while German bunds fell, lifting the 10-year yield to the highest since May, after President Barack Obama agreed to extend U.S. tax cuts to aid the recovery in the world’s biggest economy, overshadowing concern that Europe’s debt crisis will spread. The cost to protect Czech bonds against nonpayment is lower than for AAA rated France, with the credit-default swaps for the eastern European nation at 87.6 basis points yesterday and France at 93.9, according to CMA, a data provider.

“Yields on government bonds in Germany and the U.S. have risen recently because of improved sentiment toward the global economy,” Michal Brozka, a fixed-income analyst at Raiffeisen in Prague said in an e-mail.

The Czech government is seeking to raise 6 billion koruna ($321 million), according to an auction prospectus on the central bank’s website. The first round of the auction ends at noon in Prague.

A slump in the bonds yesterday lifted the yield to 2.94 percent, the highest level since July, according to prices from Komercni Banka, the Czech unit of French lender Societe Generale SA. The average auction yield will be between 2.92 and 2.95 percent, Dalimil Vyskovsky, a bond trader at Komercni said in a phone interview yesterday.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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