Investors again eager to buy Polish debt
16:41
Polish debt is once again at a premium and is attracting considerable interest. The finance minister sold new bonds at Thursday's auction with the best prices and lowest yields in several months. In the first weeks after Russia's attack on Ukraine, the situation in the financial markets was so bad that there was a problem with taking out further loans at appropriate prices – bond auctions sometimes had to be canceled, and bond yields rose significantly, which meant higher debt servicing costs for the state. Now it looks as if the situation has calmed down and returned to normal.
At a swap tender (i.e. one where investors pay not in cash but with old bonds, exchanging them for new ones), new bonds were sold for PLN 5.95 billion, the largest such tender since June 2021. The yield on the five-year bonds sold was below 6 percent for the first time since March, at 5.98 percent (just a month ago it was 7.3 percent). The 10-year paper, on the other hand, also achieved a yield below 5.5 percent for the first time since March – 5.46 percent to be precise, while a month ago they were selling at a yield of 6.96 percent.
Polish debt is gaining ground again as market sentiment has changed quite fundamentally in recent weeks. Bonds are losing value as inflation rises and investors are convinced that interest rates will rise as a result. When they come to believe that the series of rises has already ended, or is about to end, the previously overpriced bonds become attractive again. This is exactly the mechanism we are observing in the Polish market today, and the situation is also very similar in Western markets.
