(Repeats story published late on Thursday)
* Czechs to negotiate parametres of Eurobond in coming days
* Overall yield key, CDS no longer a criterion
By Martin Dokoupil
PRAGUE, April 23 (Reuters) - The Czech Finance Ministry will
negotiate the parameters of a Eurobond issue in next few days as
market conditions improved, Deputy Finance Minister Eduard
Janota said on Thursday.
The ministry halted plans to raise debt in foreign markets
in February as credit spreads rose sharply due to the global
economic crisis, making the issue too costly.
It has begun to consider tapping international markets with
a euro-denominated issue again after spreads dropped, Finance
Minister Miroslav Kalousek told Reuters earlier this week.
"I am in contact with lead managers and we will ...
negotiate. In the coming days," Janota told Reuters in a
telephone interview.
Lead managers appointed for the issue are Barclays Capital
[], Deutsche Bank <DBKGn.DE> and Ceska Sporitelna
<ERST.VI>.
Janota did not want to reveal timing for the issue, saying
the ministry would tap the market when the time is right.
"I had always come to the Eurobond market ... when we found
out that the situation on the foreign market is more favourable
than on the domestic market," he said.
"Credit default swaps are obviously not the criterion, but
(rather) what would be the overall yield abroad compared with a
domestic issue. We have our idea about the overall yield and if
it is accepted (by the leads), it is possible we will go ahead,"
Janota said.
The government dropped the plan in February to sell
five-year Eurobonds after mandated banks offered the Czechs
spreads of about 250 basis points, which the ministry considered
poor and potentially hurting the domestic market [].
Janota also did not want to reveal parameters of the planned
issue the ministry preferred, but said the lowest amount for
such placements was 1 billion euros.
"It is too early. The minimum volume of such issues at the
sovereign level is always 1 billion euros," he said.
The Czechs sold a much bigger-than-expected 2 billion euro
Eurobond last June. The 10-year paper was priced at 25 basis
points over swaps [].
The Czech Republic's outstanding Eurobond maturing in 2014
<CZ019495752=> was quoted with yield at 4.233/910 percent on
Thursday, 179 basis points above the German bunds and 149 basis
points over swaps. Domestic five-year bonds <CZ5YT=RR> traded
with yield of 4.476/067 percent on Thursday.
The country's five-year credit default swap, a measure of
risk, has dropped to 158 basis points on Thursday from all-time
high at 350 seen in mid-February.
The Czech government, like other European countries, faces a
jump in borrowing needs as an economic downturn boosts the
budget deficit.
The ministry sold more of its 10-year domestic bond than
planned at an auction on Wednesday, and yields dipped in a
response to the revived Eurobond plans [].
The cabinet, which will leave office on May 9, has forecast
the state budget gap would reach around 150 billion crowns
($7.27 billion) this year, far above the planned 38.1 billion.
Kalousek told Reuters on Monday the overall fiscal gap would
reach about 4.5-5 percent of gross domestic product this year.
The Czech economy is expected to shrink by about 2 percent
this year, for the first time since 1998, but the country has
been less exposed than many others to the global credit crunch
thanks to low exposure to foreign debt and a low deficits.
(Editing by Andy Bruce)
