Polish banking sector to purchase PLN 200 bln newly issued T-bonds in 2025 (opinion)

"Net borrowing needs next year are expected to amount to PLN 366.7 billion, a figure that hides a bit of mystery, however. First and foremost is the fact that the bonds issued by BGK/PFR [Poland's state development bank/Poland's state development fund PFR - PAP ed.] maturing next year (PLN 62.3 billion) will be rolled over into Treasury bonds," the mBank experts wrote in the report.

"Therefore, effectively, the scale of needs is closer to PLN 300 billion. We assume that there should not be any problem with such a large supply, and that the main recipient of the supply will be the banking sector, which may purchase nearly PLN 200 billion of new T-bonds," they added.

The economist at mBank lender assessed that the deposit base is expected to grow in 2025.

"What is the reason for our conviction in this matter? Firstly, we expect a larger increase in the deposit base than in the current year," they pointed out.

"Secondly, banks should be eager to swap BGK/PFR bonds for T-bonds (the sector may hold over PLN 40 billion of such bonds maturing in 2025)," they added.

The mBank experts continued that Poland's Ministry of Finance has signalled that it may carry out Treasury bill issue.

"Thirdly, the finance ministry (similar to this year) is signalling the possibility of issuing Treasury bills. Should this type of paper emerge, we expect high demand from the sector (at an appropriate valuation), due to high excess liquidity and the possibility of effective hedging of short liabilities," mBank economists assessed.

They also expect continued capital inflows from foreign investors (underweight) and decent demand from households.

"Assuming a downward trajectory of interest rates, capital inflows to mutual funds should also support these institutions' demand for Treasury bonds," the experts added.

tus/ ao/ nl/