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By Bloomberg

Commerzbank AG’s Polish unit has joined the government in saying no to investors that think it’s time to demand a higher yield premium for their money.

MBank SA canceled on Thursday investor meetings to sell at least 500 million euros ($559 million) of bonds, hours after the government scrapped its first local-currency debt sale in six years. The yield on MBank’s 2021 Eurobonds surged as much as 53 basis points from a low of 1.86 percent on April 21 as 10-year government rates jumped to the highest since October.

Borrowing costs are climbing on signs the European Central Bank’s monetary stimulus is helping to revive the euro region’s economy. Poland can avoid selling bonds for several months if markets remain unfavorable, Deputy Finance Minister Artur Radziwill said last week. The nation’s bonds and currency fell on Monday after an exit poll signaled the surprise defeat of President Bronislaw Komorowski to the opposition candidate in a vote on Sunday.

“Polish banks are in no rush to sell bonds, they are pretty well funded,” Wojciech Gorny, who helps manage the equivalent of $3.6 billion in assets at ING TFI SA, Poland’s fifth-biggest mutual fund, said by phone from Warsaw on May 7. “The best time has gone for now.”

Deposits, which account for the bulk of banks’ funding for loans, increased 11 percent to record 612 billion zloty ($168 billion) in February as an expanding economy boosts household incomes, according to the latest data published by the local financial market regulator on its website.

Abandoning Plans

MBank had hired banks to organize fixed-income investor meetings in Europe beginning May 11 as part of its plan to diversify funding sources, spokesman Piotr Rutkowski said on May 6. The following day it suspended the Eurobond sale, citing an adverse market situation. Rutkowski declined to comment for this article when contacted by Bloomberg.

The lender can afford to wait as it doesn’t need financing “urgently,” Chief Financial Officer Jorg Hessenmuller said on April 30. Those comments were echoed by Bank Zachodni WBK SA, which said in April it would sell first bonds in the next six months.

“We are under no pressure as we have a strong and stable funding base,” Eamonn Crowley, a management board member at the Polish unit of Banco Santander SA, said by e-mail on Friday. “We will monitor the markets to assess the best time. The key measurement will be the cost of Eurobonds versus other sources of funding.”

The sales would have ended a dearth of issuance from Polish banks, which have sold no Eurobonds in 2015, after raising more than $1 billion worth of the bonds a year earlier, according to data compiled by Bloomberg. They issued 3.18 billion zloty of bonds in the first quarter, almost double the 1.58 billion zloty in the same period a year earlier, the data show.

Loan Portfolios

Lenders look to tap international markets to broaden funding sources and currencies and extend maturities more in line with their loan portfolios. Polish mortgages, whose terms often exceed 25 years, account for 61 percent of banks’ total lending, compared with an average deposit taken for three to six months. Loans in foreign exchange account for 52 percent of the country’s mortgages with the Swiss franc the main currency.

The value of the franc soared when Switzerland abandoned its cap on the currency in January, sending then zloty down 20 percent. The zloty has since recovered more than half its losses.

Negative Yields

Stabilizing markets helped pave the way for Poland to sell its first international bond with a negative yield, raising 580 million francs ($625 million) on April 28. Since then, a selloff in global markets erased more than $500 billion from the value of bonds worldwide as investors soured on below-zero rates and a rebound in oil added to prospects of a revival in inflation.

The zloty weakened 0.5 percent to 4.0671 per euro at 9:34 a.m. in Warsaw. Komorowski is facing an uphill battle to save his presidency after receiving 33.1 percent of the vote on Sunday, slipping behind opposition candidate Andrzej Duda, who got 34.5 percent, according to the latest Ipsos exit poll. They will face each other in a May 24 run-off.

“It’s a storm out there and banks will need to wait it out,” Dariusz Gorski, an analyst at Bank Zachodni, said by phone on May 8. “All banks, and MBank especially, have plans to replace funding from parents so they will return to the market later. Yields may still return to interesting levels.”