Bloomberg today reports on a failed Polish treasury auction:
Poland sold 1.11 billion zloty ($390 million) of 5.75 percent Treasury bonds maturing in April 2014, the Finance Ministry said yesterday. The ministry offered between 1 billion and 2 billion zloty of debt.
Which I find strange. Poland is doing quite well in this economic downturn. It reports a growing GDP for the first half of 2009, although only slowly and diminishing. Poland should have a good chance of selling its treasuries. The article continues:
Polish bonds weakened and the zloty fell after investors bought just over half the five-year notes on offer from the Finance Ministry yesterday in the first auction since the government said the budget deficit will almost double next year. “This is a direct consequence of a very dangerous fiscal outlook presented in the 2010 budget draft,” BNP Paribas wrote in a note to clients today. “We recommend selling Polish bonds across the curve.”
Well, according to the Polish Miniserstwo Gospodarski (Ministry of Economy) the fiscal situation for 2009 looks like this: From the figures in the report above you’ll see that halfway through the year, Poland has already spent 84.4% of the yearly budgeted amount to service its foreign debt. I’m not quite sure how to interpret the figures but it seems to me that there are two interpretations. Either Poland is paying its debt back faster than projected – which would be good news for creditors, or its debt servicing load is much bigger than projected and the 6.1 bln zlotys won’t suffice- which would be bad for Poland. Looks like BNC Paribas takes the latter view and recommends you get rid of all Polish bonds. It is thus possible that this will spill over into 2010 budgeting. Can you trust BNC Paribas analysis? Hhm, probably not.