Poland makes final strike at low borrowing costs for 2012

By bne IntelliNews November 20, 2012

bne -

Poland struck again to take advantage of the current emerging market bond rally on November 19 as it reopened its October issue of 12-year euro-denominated notes to raise €750m.

Reflecting the continued momentum provided by the recent liquidity actions of the US Federal Reserve and the European Central Bank, the bonds were priced to yield 135 basis points (bp) over mid-swaps, reports Bloomberg, compared with the 143 bp spread when it sold the original €1.75bn tranche just over a month ago on October 2. According to Euroweek, the morning book-building attracted orders of €1.1bn.

"We decided to tap the euro market to take advantage of yields at historic lows," Deputy Finance Minister Wojciech Kowalczyk said in an emailed statement. "This will be our last public sale of bonds on foreign markets this year."

Like neighboring Slovakia, Warsaw has accelerated its borrowing in the last few weeks as it taps investors flush with cash and looking for yield. The pair also clearly have an eye on talk in some quarters of a bubble that may be about to burst, and thus are using the final months of the year to front-load 2013 borrowing needs.

Since that last euro-denominated issue, Poland returned to the Japanese market for the second time this year on November 2 as it doubled a planned issue to raise JPY66bn (€639m). That success saw Polish yields tighten across the board as investors bet that it may signal the end of debt issuance by Warsaw for the year.

Overall, Poland has issued the equivalent of $11.1bn of foreign currency debt in 2012, excluding the latest issue. That trails only China's $30.2bn among emerging market peers, according to data compiled by Bloomberg.

Slovakia struck to take advantage of record low borrowing costs by selling €1.25bn of 12-year bonds on November 7, at a yield of 3.49%. It then tapped a five-year bond issue for €94.2m last week, and said on November 15 that it plans to also issued a Samurai bond in the first half of 2013. Japanese investors have been looking outside their usual Western European markets for yield as the Eurozone crisis continues.

"Clearly, the Poles are eager to take advantage of very liquid and cheap financing conditions," wrote Timothy Ash of Standard Bank, noting that "the longer term outlook is much more uncertain."

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