Poland issues bonds at negative yield

By bne IntelliNews April 28, 2015

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Poland became the first CEE sovereign to place international bonds at a negative yield on April 28 as it sold CHF580mn in three-year Swiss franc denominated bonds. 

The Eurobond issue was sold at 37bp above mid swaps, sources said, yielding minus 0.213%. The price squeezed down from initial guidance of 38bp, while the volume rose from an earlier target of CHF200mn.

The Ministry of Finance had announced the issue on April 27, saying it would be based on local demand. It noted that securing negative yield was the target, hence the relatively small original volume.

It had said financial conditions it would put forward on the issue were "demanding", and that it would use the proceeds to refinance existing CHF-denominated debt. Poland could not only extend the debt's maturity while escaping interest, but may also receive income, an official had noted.

Poland joins Germany in charging investors to lend it money, even though its credit rating is several steps below its AAA-rated neighbour. The bond takes advantage of the National Bank of Switzerland's negative rates, as well as the European Central Bank's massive bond buying programme. 

Poland has CHF1.5bn worth of notes due in May. The Ministry of Finance priced a 7-year Swiss franc denominated bond in September, with the nominal amount of CHF500mn. High demand allowed it to push to a yield of 1.035% - a record low at the time.

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