Poland Trims Auction Offer in Post-Election Test for Bond Market

  • Poland cuts maximum offer to 8 billion zloty from 10 billion
  • Opposition Law & Justice won majority in parliament on Sunday

Poland decided to test investor appetite for zloty-denominated government bonds by going ahead with this week’s auction in the wake of the nation’s general election. To help ensure the sale succeeds, it cut the maximum amount offered by 20 percent.

The Finance Ministry plans to sell on Thursday between 5 billion zloty ($1.3 billion) and 8 billion zloty of notes maturing in July 2017, April 2021 and July 2026, it said in a statement on Tuesday. The ministry earlier indicated it may sell as much as 10 billion zloty at the auction and Finance Minister Mateusz Szczurek said the sale may be postponed if markets are “erratic” after Poland’s ballot on Oct. 25.

Opposition group Law & Justice, which wooed voters with pledges to increase social spending, reverse an increase in the retirement age and tax banks, won a parliamentary majority in Sunday’s election. Having underperformed most emerging-market peers this month, Polish bonds advanced on Tuesday, reducing the yield on the July 2026 notes by 4 basis points to 2.76 percent at 4:02 p.m. in Warsaw.

“Given the relatively favorable situation in core markets and a rather calm reaction of investors to the result of the parliamentary election, there are no obstacles for the auction to take place on Thursday,” Bank Pekao SA economists wrote in a report.

Poland has fully financed this year’s borrowing needs of 154.8 billion zloty, according to Bloomberg calculations. It sold 1.75 billion euros of euro-denominated bonds on Oct. 7 and 5.64 billion zloty of local-currency notes at a switching auction the following day.

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