WARSAW: Poland's two- and five-year borrowing costs fell to an all-time low on Wednesday as investors encouraged by the country's relative fiscal strength and expecting lower interest rates snapped up its bonds.
The auction raised a total 8.1 billion zlotys, far more than the 4.0-6.0 billion zlotys the finance ministry had indicated.
"The tender has confirmed that Poland is assessed by investors as the regional safe haven," said Piotr Marczak, the head of finance ministry's debt department.
Poland sold 3.05 billion zlotys ($945 million) of zero-coupon bonds maturing in July 2015 at a yield of 3.17 percent and 5.03 billion zlotys of fixed-rate bonds due April 2018 at a yield of 3.43 percent.
The cost of funding in both cases was the lowest Poland has ever achieved at a bond auction, the finance ministry said.
Polish yields and zloty currency showed little reaction to the debt crisis in Cyprus that raised fears about euro zone financial sector stability and sent the euro near a 4-year low versus the dollar.
The finance ministry said it would not hold a supplementary tender on Wednesday.
"Although space for yields to go higher seems to be limited, today's sale satisfied the market appetite for now," said Maciej Popiel, a fixed income trader at PKO BP.
Poland's diversified economy is central Europe's biggest and it is the only one of the European Union's 27 members to have avoided recession since the financial crisis of 2008.
Growth has been hit by recession in the euro zone, its biggest trading partner, however, slowing to 1.1 percent year-on-year in the fourth quarter better than most EU states but less than a quarter of the rate seen a year before.
That prompted the central bank to surprisingly cut interest rates by 50 basis points in March, bringing official rates to an all-time low of 3.25 percent.
The bank's governor said the cut completed the easing cycle, but markets are pricing in two more 25 basis point cuts over the next six months
Falling interest rates usually translate into rising prices and lower yields for shorter-dated debt.
Dealers said the bond sale's success showed investors were not concerned about a sharp rise in the central budget deficit caused by the economic slowdown.
Poland managed to lower its budget deficit to an expected 3.5 percent of output in 2012, just above the EU's 3 percent limit, prompting credit rating agency Fitch to change the outlook on its A- rating to positive from stable last month.
Standard & Poor's also assigns Poland an A- rating but Moody's Investors Service rates the country one notch higher, at A2. Both assign a stable outlook.
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