Slovenia Doubles Target at Debt Sale as State Banks Buy

Slovenia sold more than double the amount planned at a Treasury-bill sale, easing pressure on its financing needs as the first post-communist nation to adopt the euro looks to avoid an international bailout.

The government raised 1.1 billion euros ($1.44 billion) in an auction of 18-month bills, compared with its 500 million-euro target, the Finance Ministry in Ljubljana said in an e-mailed statement today. The yield was 4.15 percent, compared with 3.99 percent in December 2011. It also repurchased 510.7 million euros of notes at a yield of 3.99 percent after planning to buy as much as 855 million euros.

State-controlled banks including the country’s two largest, Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d., signaled they would participate in the biggest auction in six months as Prime Minister Alenka Bratusek’s new government tries to convince markets Slovenia won’t follow five other euro members in seeking aid.

“The successful debt sale is in line what we had expected although the extent of the demand comes as a surprise,” Abbas Ameli-Renani, an emerging-markets economist at Royal Bank of Scotland Group Plc in London, wrote in a note to clients. “Today’s auction takes pressure off the government’s finances for the coming months and possibly even until the end of the third quarter or early fourth quarter.”

Slovenian bonds due in October 2022 gained after the sale, with the yield falling 47 basis points to 5.85 percent as of 5:03 p.m. in Ljubljana. The bond’s yield is on track to have the biggest single-day drop since it was sold, according to data compiled by Bloomberg.

CDS Price

The cost to insure Slovenian government bonds against non-payment for five years tumbled 17 basis points, the steepest fall among emerging-European nations tracked by Bloomberg, to 355, according to data compiled by Bloomberg. The price had jumped 141 basis points since the start of the year through yesterday on concern investors would make Slovenia the sixth euro-area country after Cyprus to seek a bailout.

“The fact that the ministry accepted foreign demand and offered a slightly higher rate is a step in right direction in order to calm the markets,” Milan Smiljanic, head of trading at Perspektiva d.d. in Ljubljana, said by e-mail after the auction.

French Support

The ex-Yugoslav republic, which last sold foreign debt in October and missed a target for T-bill sales by almost half at an auction on April 9, is turning to local investors after a second recession since 2009 caused a banking crisis and fueled speculation the nation would follow Cyprus in seeking aid.

“France has confidence in what’s started in Slovenia, which is a clean up of its budget and courageous steps to deal with the banking system and improve competitiveness” French President Francois Hollande said in Paris today after meeting his Slovenian counterpart Borut Pahor. “We should provide Slovenia with what it’s asking for, which is confidence.”

Bratusek told lawmakers today that while urgent measures needed to be taken to address Slovenia’s woes, the country doesn’t need a bailout. The government will present measures to reduce the budget deficit and fix the banks within a month, a time frame agreed with European leaders in Brussels, she said.

“Banks are the priority, and if they don’t start lending once their balance sheets are cleaned up, we’ll have done nothing,” she said.

Slovenia, which adopted the euro in 2007, sold 12-month notes at a yield of 2.99 percent at its last T-bill auction on April 9, up from 2.02 percent for similar bills on Feb. 12, Finance Ministry data show.

Boosting Holding

BlackRock Inc., the world’s biggest money manager, said it would boost its holdings of Slovenian bonds if the nation successfully reformed its troubled banks. Today’s auction of 18-month securities will draw “very good” demand, said Scott Thiel, deputy chief investment officer of fixed-income securities at BlackRock in London.

“The bonds are very attractive, it’s just hard to get them,” Thiel said in an interview at BlackRock’s London office yesterday. “The government has to continue pushing forward with this idea of sorting out the banks. I also think that there has to be a little bit of a return of investor confidence. I think the bill auction will shore that up.”

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