* Final guidance set at mid swaps +105 bps -lead sources
* Volume set at 2 billion euros
* Bond looks set to have fulfilled 2010 borrowing plan
(Adds final guidance, dealer quotes)
By Jana Mlcochova and Carolyn Cohn
PRAGUE/LONDON, Sept 6 (Reuters) - The Czech Republic set
final guidance for a 2 billion euro, April 2021 Eurobond on
Monday, sources at the bond managers said on Monday, twice
lowering its bid guidance in an indication of strong demand.
The Finance Ministry set guidance at mid swaps plus 105
basis points after initially taking bids at 115/120 points.
The issue marks a turnaround from April, when the
then-interim government scrapped plans for a Eurobond as the
Greek crisis drove up yields on foreign markets.
Global risk aversion has abated, pushing yields down, and
the new Czech centre-right government has introduced austerity
plans, winning praise from rating agencies and pushing yields
down more.
"The pricing is fairly cheap and the interest of investors
seems high, which these days is an important thing," said Robert
Weiner, fixed income dealer at UniCredit.
"So I think it's good for all involved parties, whether they
be investors, the managers or the issuer."
It is the republic's largest euro bond since June two years
ago, when Prague issued a 2 billion 10-year euro bond at just 25
basis points over swaps before the economic crisis hit debt
markets.
The outstanding Czech 2019 Eurobond <CZ021515329=> was
quoted at a yield of 3.389/151, down nine basis points over
Friday's close. It was trading at 84 basis points over mid
swaps.
By comparison regional peer Hungary, which is still
struggling to emerge from crisis, saw its 10-year benchmark
Eurobond <HU021299367=> trade at a yield of 5.715/267, or 318
points over midswaps at 1345 GMT.
GOOD TIMING
With the public sector funding gap expected to reach 5.3
percent of gross domestic product this year, the Czechs face a
record 280 billion crowns in borrowing needs.
The ministry has sold 130 billion crowns in domestic state
bonds and plans to offer 43 billion crowns in domestic bonds by
the end of the year. The ministry sees net treasury bill
issuance at minus 25 to plus 25 billion crowns, in the official
plan.
Along with another 12.7 billion Czech crowns in loans from
the European Investment Bank, the 49.4 billion crowns from a 2
billion euro bond could potentially leave some room open for
more borrowing, particularly if the Finance Ministry goes
through with its plan to raise its reserves by 20 billion
crowns.
The ministry had earlier said it would issue at least 1
billion euros in a Eurobond.
The Finance Ministry, which administers the sale, hired
Deutsche Bank <DBKGn.DE>, Barclays Capital <BARC.L> and Erste
Group's <ERST.VI> Czech unit Ceska Sporitelna to lead the issue.
The lead sources said final pricing would take place later on
Monday.
Some dealers said the pricing could have been squeezed below
100 basis points if the bond were smaller.
"It is a relatively big volume so I think the pricing is
fair," said Filip Lesch, a fixed income dealer at CSOB.
The Czechs last sold a Eurobond, in Swiss francs, last
October. This is their first euro-denominated Eurobond since
April 2009, when the ministry priced a 1.5 billion euro bond at
mid swaps plus 190 basis point.
(Reporting by Jana Mlcochova; editing by Michael Winfrey and
Hugh Lawson)
