* Czech sells more of 10-year bond than planned
* Yield rises, longer-dated papers under pressure
(Updates with top-up round, background)
PRAGUE, June 3 (Reuters) - Demand held up for a Czech
10-year bond auction on Wednesday but the yield rose from
previous auctions as global supply issues and concerns over
rising Czech government debt took a toll on pricing.
The Czech Finance Ministry sold 8.19 billion crowns ($437
million) worth of 5.00 percent coupon government bonds due in
2019 <CZ1002471=> to investors.
Investor demand reached 13.54 billion crowns, more than the
8 billion on offer. The average yield rose to 5.757 percent from
5.479 in an April auction. A March inaugural auction had shown
an average yield of 5.619 percent.
"I would have expected slightly lower demand but it is
nothing special although it is not disappointing," said Komercni
Banka fixed income trader Dalimil Vyskovsky.
He said lower prices and rising swap spreads, up around 20
basis points this week, are indicative of the direction the
market is going in. "This auction gives some more insight for
the next long auction," he said.
The 10-year yield on the secondary market ticked lower after
the auction to trade at 5.849/5.638 percent, up around 44 basis
points in the past three weeks, according to Reuters data.
The German 10-year yield <DE10YT=RR>, Europe's benchmark,
has risen 27 basis points to 3.585 percent in that time, showing
investors pricing in a growing premium to lend to the Czech
Republic.
Czech interest rate swap yields have also jumped around
20-30 basis points on the longer end since mid-May, tracking
global yield curves higher as inflation concerns grow on the
back of the amount of supply hitting markets.
Barclays Capital recommended on Tuesday paying Czech 10-year
interest rate swaps at 3.96 percent, targeting a rise to 4.80
percent over the next six months, due to the likely end of
interest rate cuts and rising government debt. []
The Czechs have also doubled this year's borrowing plan to
280 billion crowns, although they have secured a good chunk in
auctions since March, including with a euro-denominated bond.
Finance Minister Eduard Janota said at the end of last month
it has already covered 180 billion of its plan.
"It is still a relative success that the finance ministry
was able to sell this amount (in today's auction) given that we
have a lot of negative news circulating about future supply,"
said Jan Cermak, markets analyst at CSOB bank.
The export-reliant Czech economy, like others in central
Europe, has dropped with falling western demand for its cars,
auto parts and electronics, with the government deficit tripling
this year to an expected 4.5 percent of gross domestic product.
Central European debt markets have been boosted since March
by pledges of aid for countries in need, helping risk sentiment.
But a fall in yields has slowly started to reverse.
Polish auctions since March have stayed well-bid, with all
shorter-dated 2-year and 5-year bonds on offer being sold at
auction on Wednesday. []
* For a TABLE on Wednesday's auction click on
[]
(Reporting by Jason Hovet; editing by Mike Peacock)
