Czech bond meets poor demand on weak core markets

                                
PRAGUE, Feb 13 (Reuters) - Demand for Czech 15-year bonds
fell short of the amount on offer in Wednesday following a rise
in European yields and steepening of interest rate curves.
                                
 Investors asked for just 4.82 billion crowns ($275.4
million) worth of the 4.70 percent bond maturing in 2022
<CZ15YT=RR> <CZ1001945=>, below the 5.1 billion crowns worth of
paper on offer in the first round of bidding.
                                
 The Finance Ministry however sold just 3.62 billion worth of
the paper, cutting off bids at around market yield levels ahead
of the auction. The average yield was 4.790 percent, the maximum
accepted yield was 4.804 percent.
                                
 There were no bids in the second round, and the ministry
bought 3.38 billion worth of the paper into its own portfolio.
                                
 "There were two main factors - higher rates in Europe and a
tendency of both European and Czech rate curves to steepen, so
people were rather less interested in long-term bonds," said
Komercni Banka trader Dalimil Vyskovsky.
                                
 European bond prices dropped on Tuesday after billionaire
investor Warren Buffett offered to take over some liabilities of
bond insurers, lifting equity markets.
                                
 The drop continued on Wednesday after stronger than expected
U.S. retail sales figures.
                                
 The Czech 15-year bond yield gained 7 basis points on
Tuesday and added another 1 basis point to 4.82/79 percent on
Wednesday.
                                
 One Prague fund manager noted that the Finance Ministry cut
off bids in the first round at around 5 basis points above the
corresponding swap rate.
                                
 "It was not too attractive against swaps, from the point of
view of traders playing the swap spread the levels were nothing
spectacular," the fund manager said.
                                
 "(Earlier) these long bonds could be bought some 10 basis
points above swaps. We can see they are not ready to accept bids
at any price." 
 - For a TABLE with auction details, click on [ID:nLnPRA001753]
 (Reporting by Jan Lopatka, editing by Mike Peacock)