ING Bank to introduce Gdynia bond
The city is planning to raise zl. 28 million ($12 million) to finance the purchase of 50 Mercedes buses from Sobieslaw Zasada Centrum SA for the city's public transportation company. The zloty-denominated bonds, with a par value of zl. 100,000 ($42,000), will be privately placed with banks and institutional investors and carry maturities of between one and four years.
The spread will be tied to the yields on one-year T-bills, ranging from 50 basis points for the one-year bond to 150 basis points for the four-year paper.
Bankers are responding favorably to the introduction of the instrument, pointing out that the Gdynia issue will definitely be followed by others. "From a legal point of view, the risk is equal to that of T-bills, as the state budget is responsible for the municipalities," said Miroslaw Wilkolek, treasurer at Bank Depozytowo-Kredytowy. "Of course we are helping local governments by buying the bonds and, at the same time, picking up a percentage point more than the Ministry of Finance offers."
The down side, Wilkolek said, was that municipalities only plan a year down the road, making the longer maturity instruments a little riskier. "For one-year paper, you know the budget is ready, and they have the funds to pay it off. But no one knows what will happen in four years - and the budget has to be approved by the city council, which does leave some doubt."
The spread will be tied to the yields on one-year T-bills, ranging from 50 basis points for the one-year bond to 150 basis points for the four-year paper.
Bankers are responding favorably to the introduction of the instrument, pointing out that the Gdynia issue will definitely be followed by others. "From a legal point of view, the risk is equal to that of T-bills, as the state budget is responsible for the municipalities," said Miroslaw Wilkolek, treasurer at Bank Depozytowo-Kredytowy. "Of course we are helping local governments by buying the bonds and, at the same time, picking up a percentage point more than the Ministry of Finance offers."
The down side, Wilkolek said, was that municipalities only plan a year down the road, making the longer maturity instruments a little riskier. "For one-year paper, you know the budget is ready, and they have the funds to pay it off. But no one knows what will happen in four years - and the budget has to be approved by the city council, which does leave some doubt."
