UPDATE 1-Slovak bond auctions see weak demand

                                
 (Adds second auction results, agency comments)
                                
 BRATISLAVA, April 9 (Reuters) - Slovakia continued to see
weak foreign demand for its debt on Thursday, bond auctions
showed, as investors kept seeking more attractive opportunities
elsewhere.
                                
 Some traders said higher accepted yields on Thursday
signalled increasing borrowing needs as deepening economic
crisis curbs budget revenues.
                                
 The Finance Ministry's Debt and Liquidity Management Agency
(ARDAL) sold 72.6 million euros in 8-year, 4.2 percent coupon
<SK040417208=> bonds on Thursday, the eighth auction since
Slovakia joined the euro zone in January [ID:nBSD000178].
                                
 Total demand in the auction was 88.9 million euros, down
from 305 million in the previous auction of the paper on Feb. 2.
No foreign-based investors bid, compared with bids worth 67.7
million euro in the previous sale.
                                
 Traders said low liquidity on the secondary market with
Slovak bonds meant wider bid/offer spreads, which played against
potential gains.
                                
 "I'm not surprised there were no non-residents (investors),"
said VUB Banka dealer Stanislav Figlar. "A potential gain from
the yield curve's move is eliminated by the difference between
the buy and sell prices of the bond."
                                
 The debt agency said in March investors showed more appetite
for debt from countries with higher credit ratings, which are
now boosting borrowing to cover bank bailouts and economic
stimulus packages.
                                
 In the second auction, Slovakia sold 316.3 million euro
($420 million) worth of the four-year, 3.5 percent coupon state
bonds [ID:nBSD000179]. The total demand dropped to 438.8 million
euro, down from 463 million euro in the previous sale.
                                
 Average accepted yield in the afternoon sale of the 4-year
state bonds, rose to 3.9513 percent from 3.5600 percent in the
first auction of the paper on March 2. Dealers said the yields
were above the secondary market levels before the auction.
                                
 "The second auction was a surprise, ARDAL accepted yields
141 basis points over the swap curve," Figlar said. "This result
suggests that the state treasury needs money."
                                
 Kapusta said the auction result reflected the need to comply
with the state debt management plan which defines the structure
of debt portfolio. This meant borrowing through more expensive
bonds rather than cheaper short-term treasury bills.
                                
 Slowing economic activity -- the central bank expects
recession this year -- is curbing Slovakia's state budget
revenues and may increase financing needs if the government
allows a rise in the fiscal deficit.
                                
 Slovakia has a relatively small debt of around 30 percent of
gross domestic product and the debt agency said last month it
had already covered all bonds maturing this year, which could
limit the impact on refinancing costs.
 (Reporting by Martin Santa; Editing by Ruth Pitchford)