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US FIX - 05/08/21

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Post LIBOR Settle Update

--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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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com