* Slovenia to buy back dollar bonds, issue new euro debt
* Third such move this year
* Widens pool of bonds eligible for ECB bond buying
By Dhara Ranasinghe
LONDON, Oct 19 Slovenia's borrowing costs held
close to recent record lows on Wednesday after it unveiled a
plan to reprofile its debt in a move that takes advantage of the
European Central Bank's massive bond-buying scheme.
In its third such move this year, Slovenia said late on
Tuesday that it would buy back old dollar debt that is not
eligible for the ECB programme. At the same time, it will issue
new euro bonds, Thomson Reuters' markets news service IFR
The deadline for the dollar bonds tender, which will be for
a maximum $500 million, is Oct. 26 - the same date the euro
bonds are expected to price.
The move, also undertaken by Latvia last year, could ease
concerns that the ECB is running out of Slovenian bonds to buy,
while having little overall impact on the country's debt levels.
It also provides an opportunity, analysts say, for the small
issuer to take advantage of ECB demand for euro zone government
The central bank has been buying bonds across the region
since early last year in an effort to boost economic growth and
inflation. While talk this month of a potential "tapering" of
the programme has unnerved the market, many analysts expect the
scheme to run beyond its March 2017 end date.
"We have not heard yet about what kind of bond this will be,
but Slovenia will probably make sure it's a five or 10-year
issue - one that will be eligible for QE," said Martin van
Vliet, senior rates strategist at ING.
"It is a smart move - taking advantage of a large buyer in
the market. The ECB is likely to remain around for much of next
year, so it makes sense to front-load funding."
Slovenia's 10-year bond yield, an indication of
the rate at which the country can borrow on financial markets,
traded at 0.61 percent on Wednesday.
It edged higher after the debt announcement as traders
priced in new issuance but remains within sight of this month's
record low of about 0.55 percent.
Slovenia, which joined the euro zone in 2007, conducted bond
swaps in May and August.
The debt plan is also a way for Slovenia to benefit from low
bond yields, said Patrick Jacq, Europe rate strategist at BNP
Slovenia's 10-year borrowing costs have fallen by about 30
basis points since early August.
Analysts say that an improving economic outlook has boosted
sentiment towards Slovenia, which narrowly avoided having to
seek an international bailout for its banks in 2013.
The government raised its economic growth forecasts for 2016
and 2017 last month, to 2.3 percent and 2.9 percent
respectively, citing stronger growth in exports.
Other euro zone bond yields were 1-2 basis points lower on
the day, falling in step with British gilt yields after solid
demand at a sale of 10-year bonds.
With the ECB meeting on Thursday, overall trade in bond
markets was subdued.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Dhara Ranasinghe; Editing by David Goodman and