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Sept. 11 (Bloomberg) -- Record-low yields are luring Poland back to the Swiss bond market as the biggest sovereign issuer of franc debt outside the Alpine nation sold its longest-maturity notes in six years.
Poland raised 500 million francs ($533 million) yesterday offering securities due September 2021 at a yield of 1.035 percent, the Finance Ministry said. The rate on Poland’s franc notes due in May 2019 fell to an all-time low of 0.63 percent on Sept. 5, with the spread over similar-maturity Swiss government debt at 59 basis points yesterday, within seven points of Sept. 3 record, data compiled by Bloomberg show.
Proceeds from the debt sale will help Poland roll over 750 million francs of bonds maturing Sept. 23 and pre-finance 2015 borrowing needs, Deputy Finance Minister Dorota Podedworna- Tarnowska said by e-mail Sept. 9. It’s also a source of more economical financing because interest costs will drop compared with the bond due this month, said Emiliano Surballe at Bank Julius Baer & Co.
“For Poland it is cheap, it’s a good opportunity to reduce the coupon,” Surballe, a fixed-income analyst at Julius Baer in Zurich, said yesterday by phone. “For clients that exclusively invest in Swiss francs this deal makes sense.”
The government marketed yesterday’s notes with a 1 percent coupon, compared with 3 percent for the bonds due in less than two weeks. Swiss investors bought 97 percent of the securities, according to the Finance Ministry, which said it paid the least on record to sell debt in the Swiss market.
Poland has more outstanding debt in francs than the combined value of securities held by Italy and Slovakia, ranked second and third, according to data compiled by Bloomberg. It also holds a wider variety of franc-denominated bonds than the two countries.
The European Union’s largest eastern economy, rated A2 by Moody’s Investors Service and A- by Standard & Poor’s and Fitch Ratings, has 1.5 billion francs in notes maturing in May 2015. Yesterday’s offering was Poland’s first in the currency since issuing 450 million francs of fixed-rate notes and 375 million francs of floating-rate securities in April 2012.
“The Swiss franc market hasn’t seen a lot of sovereign borrowers recently, so as long as they are A-rated they are well-received,” Edgar Salzmann, a Zurich-based money manager at Zuercher Kantonalbank, said by phone yesterday. “The deal was reasonably priced.”
The yield on Poland’s 10-year zloty-denominated bonds rose two basis points to 2.98 percent yesterday, increasing for a second day after dropping to a record low on Sept. 8. The currency strengthened 0.3 percent to 4.1936 per euro at 7 p.m. in Warsaw yesterday, trimming this year’s loss to 0.9 percent, the sixth worst performance among 24 emerging markets monitored by Bloomberg.
Poland had 16 billion zloty ($4.92 billion) of debt denominated in francs at the end of June, or 2.2 percent of the total, according to Finance Ministry data. Swiss investors also held 1.5 billion zloty of Poland’s local-currency notes.
Asset managers bought 34 percent of the bonds sold yesterday, while banks purchased 30 percent, insurance companies subscribed for 22 percent, and private banks and pension funds picked up the rest, according to data from the ministry.
“It makes sense for them to show up from time to time and commit a little bit to the Swiss market,” Benno Weber, the Zurich-based head of fixed income at Swisscanto Asset Management AG, said by phone yesterday. Poland is “an issuer we like in local currency and in Swiss franc,” he said.
--With assistance from Levent Kucukreisoglu in London.
To contact the reporters on this story: Maciej Onoszko in Warsaw at firstname.lastname@example.org; Roxana Zega in Zurich at email@example.com To contact the editors responsible for this story: Wojciech Moskwa at firstname.lastname@example.org Daliah Merzaban, Stephen Kirkland