Bloomberg News

Poland Sells $1 Billion of Bonds as Borrowing Costs Decline

June 07, 2011

June 7 (Bloomberg) -- Poland reduced its borrowing costs in a $1 billion reopening of 10-year bonds first issued in April as the government’s pledge to lower the budget deficit helped lure investors.

The 5.125 percent notes maturing in April 2021 priced to yield 170 basis points, or 1.7 percentage points, above similar- maturity U.S. Treasuries, said a person with knowledge of the offering, who asked not to be identified because he wasn’t authorized to speak publicly about the transaction. The spread was 179 basis points over Treasuries in the initial sale on April 14, according to data compiled by Bloomberg.

Poland is coming to the market after financing 60 percent of this year’s borrowing needs through the end of May. The European Union’s biggest eastern member will meet its target to narrow the budget deficit to 2.9 percent of economic output next year, Finance Minister Jacek Rostowski said last month. The gap reached 7.9 percent in 2010.

“We view Poland credit as attractive versus its similarly rated peers,” said Mariusz Banasiak, who manages $14 billion in emerging-market bonds and currencies at Prudential Investment Management in Newark, New Jersey. “We are giving the government the benefit of the doubt that they will stick to their intention of bringing down the fiscal deficit down over the next couple years.”

Budget Gap

Poland may need to take additional steps to narrow next year’s budget deficit because economic growth may be weaker than the government foresees, the European Commission said today. The government expects the economy to grow 4 percent this year and next after expanding 3.8 percent in 2010.

The government last month raised 460 million euros ($648 million) from the sale of registered bonds maturing in June 2026 to German pension funds and insurers in a private offering. It also sold debt in Swiss francs, euros and yen, according to data compiled by Bloomberg.

Citigroup Inc., Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc managed the sale, the person said. The yield on the bonds rose nine basis points to 4.7 percent as of 3:31 p.m. in New York.

Poland is rated A2 at Moody’s Investors Service, the sixth highest investment-grade category, and A- at Standard & Poor’s and Fitch, the seventh highest.

--Editors: Gavin Serkin, Brendan Walsh

To contact the reporters on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net; Boris Korby in New York at bkorby1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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