INTERVIEW: Strong demand at finance ministry auctions; no risks to deficit financing seen

Budzicki said demand had been very strong at all four regular auctions held so far in 2026, exceeding expectations.

"We entered 2026 with unsatisfied demand and ample liquidity," he said, pointing to improved market sentiment, high inflows to banks and investment funds, and growing expectations of interest rate cuts.

At Wednesday's auction, the ministry sold PLN 11.87 bln (EUR 2.8 bln) of bonds against demand of PLN 25.84 bln (EUR 6.1 bln). In January, it placed PLN 12 bln (EUR 2.8 bln) at each auction, with demand ranging between PLN 17 bln (EUR 4 bln) and PLN 22 bln (EUR 5.2 bln).

According to Budzicki, expectations that the NBP reference rate could fall towards 3.25 pct are a key factor supporting bond purchases, as declining yields have generated returns in recent months. January demand was also boosted by around PLN 14 bln from a bond redemption and interest payments, much of which was likely reinvested.

Although February lacks major redemptions, he expects demand to remain solid. Since the start of the year, the ministry has raised

PLN 55 bln on the domestic market, covering around one quarter of planned net wholesale issuance.

Budzicki said foreign currency issuance plays a secondary role, with the euro market remaining key. He expects full financing of 2026 borrowing needs in the fourth quarter, with pre-financing for 2027 starting thereafter.

"In my view, financing the record-high borrowing needs is not at risk," he said, noting the ministry holds a cash buffer of nearly PLN 183 bln.

PKO BP forecasts further declines in Polish bond yields, particularly at the long end of the curve, leading to flattening. The 10-year yield is seen falling to 4.60 pct by year-end, he added.

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