Poland has mandated state-owned bank BGK to intervene on the bond market to soothe potential tensions, the head of the finance ministry's debt department said in comments authorised for release on Friday. Polish authorities already used BGK at the end of 2010 to sell euros in order to keep the zloty strong and avoid breaching key debt levels.
"We see the possibility of using BGK to support the bond market in case of tensions unrelated to fundamentals," Piotr Marczak told Reuters. "BGK would be able to buy bonds on the secondary market. We (the finance ministry) could guarantee to buy back these papers if need be."
The ministry does not rule out running fully transparent debt buy-back auctions, he said. Just as with currency market interventions, the ministry will not inform investors when BGK intends to buy bonds from the market but will say when it buys back bonds from BGK, he said.
Foreign investors currently hold Polish treasuries worth over 140 billion zlotys ($51.04 billion) and both the ministry and the central bank must keep reserves to protect against potential capital flight in the case of a major crisis. The ministry and the central bank would work hand in hand to calm the market in the event of a "large" crisis, Marczak said.
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