Record demand as Czechs keep up borrowing frenzy

[PRAGUE] Demand for new two-year Czech bonds soared to a record high at an auction on Wednesday as the Finance Ministry kept up a borrowing spree to finance a swelling budget deficit amid the coronavirus outbreak.

Investors bid 102.5 billion crowns (S$5.9 billion) for the new paper with a 0.10 per cent coupon, more than 20 times the offer. The Finance Ministry sold 31.4 billion crowns worth of the bonds in the first, competitive round of bidding.

The Czech Republic has ramped up borrowing in the last month as it seeks to finance a five-fold increase in its central state budget deficit target, which is planned at a record 200 billion crowns.

Demand has stayed strong for Czech debt, especially at shorter durations, with the central bank stuck in easing mode after cutting interest rates by 125 basis points in March. The bank has said it was ready to cut more if needed.

Also on Wednesday, the ministry sold 12.1 billion crowns of bonds due in 2027 and 11.3 billion of 2031 bonds, with the yield on the former rising a touch while falling on the latter.

Going into Wednesday's auction, the ministry had sold 255.8 billion crowns in bond and Treasury bill auctions in the past three weeks . 

REUTERS