Poland bond yields widen vs WIBOR

That gap matters because much of Poland’s corporate debt is priced off WIBOR. When Treasury bonds offer nearly the same nominal return as floating-rate corporate notes paying WIBOR plus a margin, investors have less incentive to take credit risk for a small extra spread. Emil Szweda, chief analyst at Michael/Ström Dom Maklerski, said that makes it harder to justify buying bonds such as those offering WIBOR plus 2.5 percentage points.

The pressure is already showing up in issuance. Investors this week bought 10-year subordinated notes from VeloBank at that margin, while Bank Pocztowy earlier sold four-year senior bonds at a 2.2-point spread. But those deals stand out as exceptions in a market where fewer medium and large corporate offerings are getting done.

Since the selloff in government bonds began, only a handful of larger corporate issues have reached the market, and just one — AB SA’s July deal — was placed with traditional institutional investors before sovereign yields surged. Other offerings have been aimed at retail buyers, structured through bank groups, or sold bilaterally to private debt funds at much higher rates, including around 14.5%, which reflects a very different part of the market.

For investors, the message is twofold. Corporate issuers may delay borrowing, reducing supply in a market that already lacks depth, while investors in bond funds may still face inflows without enough new paper to buy. At the same time, banks remain active competitors for lending to small and mid-sized companies, giving issuers an alternative to the bond market for now.

The longer-term risk is that corporate coupons have to rise to keep pace with sovereign yields. Szweda said one way that adjustment could happen is through higher WIBOR, a scenario that has become more plausible as the Fed, following the ECB, has raised rates, Poland’s core inflation has climbed to 3.3%, and oil prices have stayed well above $100 a barrel despite recent declines.