* Decision on Eurobonds after reforms agreed
* Eurobond would have 10-15 year maturity, benchmark size
* Floater bonds important part of domestic financing
By Jason Hovet and Robert Mueller
PRAGUE, Feb 1 (Reuters) - The Czech Republic is drawing up
plans for a 10-15-year benchmark Eurobond of at least one
billion euros, with timing to be decided after the government
agrees its main fiscal reforms in early spring, the ministry's
debt chief said.
In a Reuters interview, the ministry's debt department head
Petr Pavelek said he expected the reform plans to send a strong
signal to investors but that the central European country was
under no urgency to tap international markets at the moment.
"There is no pressure on our side. The domestic market is in
good shape, we have enough of a cash buffer," he said. "The
crown is another aspect to take into account with the timing of
the issue."
The Czechs sold 2 billion euros worth of a 3.625 percent
coupon Eurobond maturing in April 2021 <CZ054114079=> in
September at 105 basis points over mid-swaps.
The Czech Republic has an 'A' rating from Standard and
Poor's and 'A1' rating from Moody's.
Pavelek said the next issue would be at least a benchmark
size, or 1 billion euros, which could be raised if demand is
high.
He said he hoped for better pricing than in the last issue.
Czech yield spreads over German Bunds have narrowed around
20 basis points since the start of the year to 83.5 basis points
on the Czech benchmark 2019 bond. <CZ1002471=> <DE113538=>
The Czech Republic sees its gross borrowing need dropping to
219.5 billion Czech crowns in 2011 from 251.6 billion last year.
The Czech centre-right government won power last year with
deficit-cutting pledges and markets are now watching for reform
plans to the pension, health and welfare systems.
Ratings agencies have said implementation of the reforms may
lead to a credit upgrade. Prime Minister Petr Necas has said he
wanted reforms ready by early March so they reach lawmakers
before the summer recess.
"We expect (details on reform plans) should be a positive
signal for markets. We would like to be ready from the
documenation and legal side as soon as possible," Pavelek said.
Demand for Czech debt has stayed high since the ministry
sold a 2 billion euros Eurobond in September. Bids at the first
two domestic auctions of the year doubled the offer, while the
crown rose 3 percent versus the euro in January, making domestic
debt more attractive.
MORE MARKET TRANSPARENCY
Pavelek said his department would stick to a strategy of
selling only the indicated offer amount at domestic auctions,
started late last year to improve market transparency. Before it
often sold more than planned, upsetting some market players.
Pavelek said the ministry was looking at changing auctions
in the second half of the year to possibly sell more than what
it is now able to offer -- 85 percent of the offered amount --
in the first, competitive round of auctions.
The rest is offered in a second round where demand drops
off.
"It is clear that in the non-competitive part we are not
able to reach the indicated amount," he said.
The change would come with plans to implement a new
electronic second market platform based on market-making.
He said the ministry planned to sell 30 to 40 percent of
domestic debt in the form of variable-rate bonds this year.
The Czechs have sold 56.5 billion crowns of a floating rate
bond due 2016, with the last sale in January producing an
average yield of 27.211 basis points over the 6-month interbank
rate.
The ministry has said it would also introduce a new
variable-rate bond due 2023 tied to the 12-month PRIBOR
<> in the coming quarter.
(Writing by Jason Hovet; editing by Stephen Nisbet)
