* Czechs surprise with Swiss franc bond for institutionals
* Demand double supply for Polish infrastructure bonds
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Oct 21 (Reuters) - The Czech Republic placed
an unflagged 500 million Swiss franc ($494.6 million) bond on
Wednesday, and demand for Polish road bonds rose as central
Europe's better-off states close in on their borrowing targets.
Investors have scrambled in the past month for the two
countries' debt as they limit supply, leaving many local players
with little opportunity to fill their books, but also setting
markets up for a possible downward price correction next year.
The countries have also looked to diversify financing
options with foreign currency-denominated bonds and, in Poland's
case, government-backed road bonds from state bank BGK.
The Czechs priced their first-ever 2.875 percent coupon
Swiss bond due in 2016. The finance ministry had not announced
the deal ahead of time, nor flagged plans to raise money through
other channels than the domestic and euro bond markets.
The buyers were "a broad range of Swiss institutional and
asset managers," said Martin Meili, Swiss franc head of
syndicate at RBS in Zurich.
The Czech finance ministry declined comment on any future
issues of this type but said in a statement the bond was a
strategic step "to diversifying the investor base and expanding
the number of potential financing channels".
The Czechs and Poles have been able to finance rising budget
deficits throughout the economic crisis, unlike some central
European peers like Hungary and Romania that were forced to take
loans from the International Monetary Fund.
A drop in risk aversion in the past months has significantly
narrowed bond spreads. Czech credit default swaps (CDS) have
dropped to around 67 basis points from a February high of 350,
while Polish CDS are at 107 basis points from 400 in that time.
LAST SUPPLY
Poland's state-owned BGK bank sold 1.5 billion zlotys in
road bonds due in 2018 on Wednesday and 300 million more in a
top-up sale after investors' bids were more than double supply.
[]
Poland plans to sell a total of 7.25 billion zlotys of the
road bonds this year for its road-building programme.
At a previous sale the bank sold 798 million zlotys of bonds
due 2014 with the average yield at 6.008 percent. Investors then
bid 2.9 billion zlotys compared to 3.32 billion on Wednesday.
In a separate Czech auction on Wednesday, the finance
ministry sold 4.77 billion crowns of 3-year, floating rate bonds
with bids three times what was sold and the yield dropping below
interbank market rates for the first time. []
But analysts expect more issues outside of local markets.
"Many countries are using the bullish environment to issue
whatever they can," said UniCredit EMEA economist Gyula Toth.
"There is a window of opportunity open now."
Poland is expected to see its central budget deficit double
next year and wants to collect about $13 billion from state
asset sales by the end of 2010, which could limit supply.
It stumbled last week when the $2.7 billion sale for control
of utility Enea fell through, and said on Wednesday it would not
meet its 2009 privatisation goal. []
Poland sold euro-denominated bonds worth a total of 910
million euros in September and is planning to issue $300-500
million in Japanese yen-denominated bonds in November.
The Czechs have started issuing euro-denominated bonds on
local markets. A portion of its expected 280 billion crown gross
borrowing needs this year was covered by the sale of 1.5 billion
euros of 5-1/2 year bonds on international markets in April.
(Writing by Jason Hovet; editing by Patrick Graham)
