MNI EXCLUSIVE: Slovakia Focus On Short-Maturity Sales In 2019

--Slovakia Less Likely To Issue Ultra-Long Or Currency Bonds In 2019

--Slovakia Mulling 2 Syndicated Bond Issues In 2019

By Nick Shamim

     LONDON (MNI) - Slovakia will likely concentrate on issuing shorter-dated

maturities in 2019, with less focus on either ultra-long or foreign currency

bonds, Daniel Bytcanek, the director of the Debt and Liquidity Management

Agency, Ardal, told MNI in exclusive comments.

     However, the Bratislava-based agency is mulling the possibility of two

syndication deals in 2019, with options at the short-end and in the 10 to

20-year sector of the curve, Bytcanek added.

     Depending on a market conditions, Slovakia is targeting issuance of

approximately E1 billion via a syndication deal, with the strong possibility of

a bond with an 11-year maturity, as there is a gap in redemption profile in

2030. 

     "There is a possibility to open another bond line (alongside the 11-year

maturity) via syndication or auction. The maturity could be short-term to fill

the gap in the redemption profile in 2022 or a longer-term bond, possibly

20-years," he said.

     Although T-bill issuance was only modest in 2018, Bytcanek noted Bill

issuance as a financing source would likely dry up completely in 2019.

     Gross new  issuance across the debt curve in 2019 was likely to be around

E4.3 billion, the debt head explained, helped by an increase in State Treasury

funds.

     --FOREIGN CURRENCY

     Slovakia hasn't issued any foreign currency bonds in 2018 due to the

"prudent Fiscal Responsibility Act, historically low yields in Euro denominated

debt and better budget performance," Bytcanek said.  

     He noted this would likely continue into next year, as Slovakia continued

to take advantage of cheap funding costs in the domestic market.

     "In such small gross needs, we would like to focus mainly on the cheapest

euro financing with a preference of shorter maturities," he said.

     Slovakia has seen a pick-up in foreign ownership of its debt and, according

to Ardal, 50% of investors in its bonds and T-bills portfolio are from overseas.

     --STATE OF PLAY

     Slovakia has already completed around 88% of its gross issuance plan for

the year, raising approximately E3.5 billion from the issued government

securities.

     "Original total [financing] needs decreased from around E5 billion to only

E4 billion, thanks to a better budget development and slight increase in the

balance sheet of the State Treasury," said Bytcanek.

     Slovakia launched its longest ever maturity bond in 2018 -- a new 50-year

bond launched as part of a dual-tranche deal alongside a benchmark 10-year deal.

     "The transaction attracted interest from more than 150 investors and the

final order book closed at over E5billion (for both bonds)," added Bytcanek.

     Slovakia has sold a further E1.4 billion via bond auctions and E0.6 billion

in Treasury Bill through the end of October 2018.

     Ardal only has one bond auction left this year, scheduled for November 19,

when the debt agency is expected to sell 2 bond lines for a combined E150

million. There is one T-Bill auction remaining -- expected to be for E200

million.

     --TENSIONS IN SLOVAK YIELD CURVE

     Bytcanek noted liquidity in the secondary market remains strongly affected

by the ECB operations (PSPP), adding that real money investors have almost

disappeared due to the negative yield environment in maturities up to 5-years.

     "Combination of the poor liquidity and strong demand from the ECB -- buying

more than we issue at the primary market -- created strong tension for the whole

Slovak yield curve," Bytcanek said.

     On the positive side, he was upbeat over market functioning, stating that

2018 had seen the successful launch of MTS Slovakia as a primary dealer

platform, along with the improvement in depository and settlement

infrastructure.

--MNI London Bureau; tel: +44 203-586-2229; email: nick.shamim@marketnews.com

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