Bloomberg News

Slovakia Sells 10-Year Bond as Economic Outlook Worsens

February 20, 2013

Slovakia sold 1.75 billion euros ($2.34 billion) of benchmark 10-year bonds as the eastern member in the 17-nation currency bloc boosted financing amid an economic slowdown.

The offering was priced to yield 122 basis points, or 1.22 percentage points, over the corresponding mid-swap rate, according to data compiled by Bloomberg. That represents a 146 basis-point premium over similar-maturity German bunds, or 12 basis points above the spread for Poland.

Expansion in the export-oriented economy is set to slow as demand abroad has weakened while job cuts have eroded consumer spending. The government will probably collect 361 million euros less in taxes this year, the Finance Ministry said this month, after cutting its growth forecast to 1.2 percent from 2.1 percent.

“The budget picture isn’t rosy and if the growth outlook worsens further it can be a problem, mainly in 2014,” said Jaromir Sindel, an economist at Citigroup Inc. in Prague. “It makes sense for the government to hit the market early and increase its financing buffer.”

Slovakia is rated A2, the fifth-lowest investment grade, by Moody’s Investors Service. The extra yield investors demand to hold 10-year euro-denominated bonds by similarly ranked Poland instead of Germany’s benchmark bund narrowed four basis points to 134 basis points today. Slovakia joined the euro-area currency bloc in 2009, while Poland has yet to adopt Europe’s shared currency.

Public Sale

Slovakia’s last public sale of government debt on the international market was in November when it raised 1.25 billion euros in an offering of notes due in 2024 at 150 basis points above the mid-swap rate, according to data compiled by Bloomberg. It has 4.1 billion euros in debt securities maturing this year, out of total debt of 35 billion euros, the data show.

The yield on the benchmark 2020 bond rose one basis point to 2.23 percent at 3:34 p.m. in Bratislava, Slovakia. The securities are yielding 115 basis points more than corresponding German notes.

Deutsche Bank AG, ING Groep NV, Societe Generale SA and Erste Group Bank AG’s Slovenska Sporitelna AS managed today’s sale, data compiled by Bloomberg show.

To contact the reporters on this story: Radoslav Tomek in Bratislava at rtomek@bloomberg.net; Levent Kucukreisoglu in London at lkucukreisog@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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