* FinMin sees reduction from original plan of CZK 305.7 bln
* Detailed 2011 debt strategy to be released in December
* Savings planned through more short-term debt, FRNs
(Adds analyst, 2011 issuance plans)
By Jana Mlcochova
PRAGUE, Sept 10 (Reuters) - The Czech Republic will cut
gross borrowing needs for 2011 to 250-270 billion crowns,
Finance Minister Miroslav Kalousek said on Friday, lower than
previously planned and down from 280 billion crowns this year.
The cut in the debt issuance plan reverses the negative
trend of rising borrowing needs in past years, and comes on the
heels of sweeping fiscal austerity plans by a new government.
"The amount will be somewhere in the range of 250 to 270
billion crowns," Kalousek told Reuters by phone. He said the
ministry would specify the figure in December when it releases
its next debt management strategy.
The Finance Ministry's debt strategy in December of last
year forecast 2011 borrowing needs at 305.7 billion crowns.
Borrowing needs this year are at a record 280 billion crowns
thanks to a public sector deficit pushed out to 5.3 percent of
gross domestic product (GDP) in the aftermath of the global
financial crisis.
SHORT MATURITIES, FRNS IN FAVOUR
Since winning a May election, the new Czech centre-right
cabinet has pledged wide ranging fiscal tightening and plans to
reduce the 2011 public sector gap to 4.6 percent.
The retrenchment plans have elicited praise from rating
agencies and helped attract investors who have come to favour
Czech assets as a safe haven outside of the European Union's
biggest economies.
Kalousek has repeatedly said he planned to raise the
issuance of short-term debt versus long-term as a way to cut
debt servicing costs. He also plans to issue long-term bonds
with floating coupons to make savings.
Floating rate notes have a variable coupon equal to money
market reference rate PRIBOR, and a spread. Coupons are reset
periodically.
This strategy should cut 4 billion crowns from the 78
billion in debt servicing costs planned for next year.
"Overall the environment for crown-denominated debt remains
positive," said Dalimil Vyskovsky, an interest rate dealer at
Komercni Banka.
"As for shorter maturities, needs of the market continuously
change and at the moment investors prefer long-term maturities
with fixed rate, but short maturities should be absorbed by the
market without any problems."
He said there was a lack of floating rate notes on the
market so it may be a good idea to issue those.
Czech bond yields have dropped to record lows across the
yield curve since the government began introducing its savings
plans, helped by gains for debt markets globally, and dealers
say further declines are possible.
The Czech Republic sold 2 billion euros in 10-year Eurobonds
on Monday at a margin of 105 basis point above mid swaps. Demand
hit 5.3 billion euros, allowing the ministry to cut pricing
guidance twice. The sale covered the country's borrowing needs
for the rest of the year and early 2011.
(Reporting by Jana Mlcochova; editing by Toby Chopra)
