Slovak borrowing costs up, foreign demand absent

                                
 * Average yield rises by 26 bps from previous sale
                                
 * Foreign investors place no bids
                                
 
                                
 By Martin Santa
                                
 BRATISLAVA, June 15 (Reuters) - Slovakia saw the cost of its
domestic borrowing rise at a bond auction that attracted no
foreign bids on Monday, saying yields mirrored an upward trend
in Europe and were also pushed up by a May international issue.
                                
 The Finance Ministry's Debt and Liquidity Management Agency
sold 112 million euros ($155.7 million) worth of four-year state
bonds carrying a 3.5 percent coupon, less than 316 million euros
accepted in the previous auction of the same paper in April.
                                
 The average accepted yield in the third tranche of the bond
was 4.2079 percent, compared with 3.9513 percent accepted in the
previous sale.
 "Interest rates are ring across Europe, and yields also
moved due to the sale of the eurobond," Tomas Kapusta, the head
of the agency's debt department told Reuters.
                                
 Slovakia sold an international bond worth 2 billion euros in
May, priced at 170 basis points over mid-swaps [ID:nLE891959].
                                
 Overall demand fell on Monday, reaching 174 million euros,
compared with 438.8 million in the previous sale. Foreign
investors placed no bids, compared with their demand of 100
million euros in April.
                                
 "The reason is the crisis," said Kapusta. "There are
comparable countries like Greece or Italy, offering more comfort
while carrying the same or similar yield."
                                
 Kapusta said absence of foreign investors was also caused by
a more complicated transaction settlement procedure compared
with some other markets, adding the debt agency was preparing a
primary dealership scheme that could help boost foreign demand.
                                
 The government of Prime Minister Robert Fico needs to
increase debt issuance this year because the economic downturn
curbs state budget revenues and may boost the fiscal gap above
the European Union's limit of 3 percent of gross domestic
product.
 (Reporting by Martin Santa; Editing by Victoria Main)