Demand for Czech floater bond low in stressed market

                                
 PRAGUE, Oct 22 (Reuters) - The Czech Republic failed to
place some of its inaugural 8-year, floating-rate bond on
Wednesday, evidence of the slim investor demand that has hit
central European debt markets as the global financial crisis
spills into the region.
                                
 The Finance Ministry sold 5.35 billion crowns ($277.8
million) of the paper in the first, competitive round of bidding
on Wednesday. Bids totalled 7.5 billion, short of the 8.5
billion on offer. It placed additional 40 million worth of the
paper in the second round out of 1.5 billion slated.
                                
 "Demand was pretty weak, and I expected better," a Czech
fund manager said. "The market is pretty distressed and this
will not help."
                                
 The ministry had earlier set the semi-annual coupon at the
six-month interbank PRIBOR rate, which was fixed at 4.28 percent
on Wednesday. Bonds sold with an average yield of 88 basis
points above PRIBOR, with wide spread between the minimum and
maximum yields of 60 to 108 bps.
                                
 "There is some demand but you can see the spreads," the fund
manager said. 
                                
 The Czechs, along with other regional governments, have cut
back planned issues over the past month after secondary markets
came to a near standstill as buyers disappeared and funds looked
to sell in a hunt for cash.
                                
 Hungary scrapped a bond auction on Wednesday as bids failed
to reach even half the 40 billion forints ($186.8 million) on
offer [ID:nBUD002645].
                                
 Poland has said it would cut its debt supply in November and
December due to a lower-than-expected budget deficit, while the
Czechs have also cut issues for similar reasons after it sold 2
billion euros of eurobonds earlier this year.
                                
 "They were lucky they financed in the first half of the year
with the issuance of eurobonds," said Anne-Francoise Bluher, a
fixed income analyst at Komercni Banka.
                                
 However, analysts say the country could come under pressure
next year if markets remain strained.
                                
 "It might be difficult, and maybe the Finance Ministry will
seek more issuance on the very short-end with T-bills," Bluher
said.
                                
 The Czech bond market has seized up over the past month,
with market makers afraid to quote as an oversupply hangs from
funds wanting to sell to raise cash.
                                
 The Czech central bank introduced a new repo facility that
takes government bonds as collateral to boost liquidity in the
market, and Vice-Governor Miroslav Singer said the bank could
take up market-making duties in a worst case scenario.

                                
 For a table on the auction click on [ID:nLL575696].
                                
 
 (Reporting by Jason Hovet; Editing by Toby Chopra)