HAD YOU MENTIONED central Europe to a group of DCM bankers three years ago the likely response would have been a chorus of smothered yawns. Stable, well funded and on the verge of eurozone accession, countries such as Poland, the Czech Republic and Hungary had little need of the investment banking community. They accessed the global bond markets maybe once a year, and when they did they issued a billion or two of euro-denominated paper in standard maturities that mostly found its way into the portfolios of a few big German and Austrian buyers. "Extremely boring from a banking point of view" is how Jonathan Brown, head of emerging markets syndicate at Barclays Capital, describes the region in the era before the collapse of Lehman Brothers.
In the wake of the credit crunch, however, that picture changed dramatically. Although the high-grade sovereigns at the heart of CEE came through the crisis well compared with their neighbours in both the peripheral countries and western Europe, they had to deal with a toxic combination of higher borrowing requirements and much wider credit spreads that was all the more galling for being relatively undeserved. Poland, famously the only European country to post positive GDP growth in 2009, nonetheless had to pay a spread of 280 basis points over swaps for a €750 million five-year bond issued in May that year – a big increase on the 15.5bp
