Benchmark yields drop as Poland doubles up on Samurai issue

By bne IntelliNews November 5, 2012

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Yields on the sovereign benchmark tightened and the zloty gained on November 2 as Warsaw doubled a Samurai bond issue. The ministry of finance sold JPY66bn (€639m) in five and 15-year paper, its second issue in Tokyo this year.

Poland placed JPY10bn in bonds with a 2.5% coupon, maturing in 2027, reports Cbonds. The issue was priced at 100% to yield 2.5%. It placed another JPY56bn in bonds with a 1.05% coupon, maturing in 2017, at a yield of 1.05%. Nomura and SMBC Nikko arranged the deals.

The bonds were allocated mainly to Japanese institutional investors such as banks, insurance companies, funds and public institutions. The transaction will be settled on November 8.

The issue was more than doubled at the last minute on the back of strong demand. That move saw the market betting that scheduled domestic issues in December may be reduced or pulled. A finance ministry official said on October 4 that Poland has fulfilled its PLN168bn (€41bn) planned borrowing programme for 2012, but that it would now look to pre-finance at least 20% of 2013 borrowing needs, which are defined at PLN145bn, assuming pricing remains favourable.

Like many others, Japanese investors, wary of the Eurozone crisis blighting their traditional targets in Western Europe and hunting for yield, are increasingly turning to the likes of Poland. Top mutual fund Kokusai Asset Management said in early October that it has added Poland to its $19bn flagship bond fund in a bid to diversify allocations and boost returns.

Targeting retail investors, Warsaw sold JPY25bn of five year Samurai bonds in May at a yield of 1.49%, its second issue in Japan following a four-year in July 2011.

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