Poland's first auction of benchmark notes following downgrade confirms yield recovery

By bne IntelliNews February 4, 2016

Poland sold PLN7.5bn in bonds maturing in 2018 and 2026, the finance ministry announced on February 4. The auction was the first pitch to international investors since S&P downgraded the country’s debt rating on January 15.

The volume of debt issued matched the maximum planned by the finance ministry. Poland placed PLN3.64bn worth of papers maturing in October 2018, with demand reaching PLN5.95bn at a yield of 1.665%. The previous auction of two-year bonds in late January achieved a yield of 1.68%.

Warsaw also sold PLN3.86bn worth of bonds maturing in July 2026. Demand came in at PLN5.66bn, with the average yield at 3.168%. While that is clearly above the 2.78% achieved in October, it is also significantly below the 3.36% peak on Polish 10-year notes on the secondary market in late January, when the effect of the S&P rating downgrade was strongest.

Overall, then, the auction confirms the recovery of sentiment on Polish assets following the surprise. At the same time, Polish yields remain well above the levels seen before Law and Justice began spooking the markets after taking office in November.




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