Central Europes fiscally-stronger countries Poland and the Czech Republic stepped up borrowing at auctions on Wednesday, scooping up funds despite a jump in yields. A slight pickup in global sentiment has raised investors appetite for emerging assets over the past month and auctions have been well-bid although debt has become costlier.
The Czech Finance Ministry sold a quarter more than offered of its 4.7 percent coupon bonds due 2022 at a Wednesday auction, with the average yield rising about 80 basis points from a June 2008 auction, when interest rates were 200 basis points higher.
In Poland demand outweighed supply at auctions of 2-year and 5-year bonds, with yields rising around 50-70 basis points over previous auctions. "As we expected, demand for the short end of the curve was bigger than for the long end," said Pawel Golebiewski, a fixed income dealer at BPH bank in Warsaw.
Analysts warned that, while Poland and Czech Republic are better off than their neighbours, keeping up the pace of borrowing could be tougher later this year due to economic uncertainties and a spate of competing issuance from western European countries selling record debt to combat recession.
"The overall supply of government debt is exploding now, and within that it will be harder for the Czech Republic or Poland to attract buyers," said Lars Christensen, senior economist at Danske Bank.
Central Europes bond markets are slowly recovering after the widening global financial crisis hit the region hard last autumn, and the regions currencies have taken a beating from growing concerns over growth, financing and banks.