SLOVAKIA scrapped a five-year floating-rate government bond auction on November 14 after receiving a limited number of bids due to the deepening eurozone debt crisis, the Finance Ministry's debt management agency announced. While expecting to sell €100 million to €150 million of five-year bonds, investors offered to buy only €13 million of the bonds, the Hospodárske Noviny daily reported on November 15.
“From my point of view it is a direct reaction to things happening in Europe at the moment,” said Daniel Bytčánek, the head of the Slovakia’s Debt Management and Liquidity Agency (ARDAL), as quoted by Hospodárske Noviny.
Because investors were willing to buy only one-tenth of the offered bonds, the agency scrapped the entire auction. Financial analysts said the poor response at the bond auction was not solely due to nervousness over sovereign debt issues in other parts of Europe but was also because of the uncertain political situation in Slovakia after the fall of the government. Investors are reportedly concerned that Slovakia may not approve further fiscal austerity measures.
“I do not expect there will be significant change in the state budget so Slovakia will have to deal with higher interest surcharges temporarily,” said David Marek, chief economist at Patria Finance, as quoted by Hospodárske Noviny.
The Finance Ministry said that even though investors are nervous, Slovakia’s ability to finance and roll over its debt is not endangered. Nevertheless, ministry spokesman Martin Jaroš stressed that it is important for parliament to pass a budget that will further consolidate public finances.
