Bloomberg News

Polish Two-Year Bond Yield Falls to Record on Rate Cut Bets

April 04, 2013

The yield on Poland’s two-year bonds fell to a record low on growing speculation Poland’s central bank will cut interest rates to aid growth.

The yield on the notes declined five basis points, or 0.05 percentage point, to 3.11 percent at 4:54 p.m. in Warsaw, below the previous lowest close from Dec. 21, according to generic prices compiled by Bloomberg. The zloty strengthened 0.3 percent to 4.1874 against the euro, paring this year’s depreciation to 2.5 percent.

Poland’s economy grew at the slowest pace in four years in the fourth quarter of 2012, piling pressure on the central bank to continue to reduce interest rates. With inflation at its lowest level since 2006, derivatives traders are betting that policy makers will reduce borrowing costs further.

“The sentiment driving down yields is sustained,” Bartlomiej Wit, chief fixed-income and interest-rate derivatives dealer at ING Bank Slaski SA (ING) in Warsaw, said by phone today. “Weak economic data from the euro area and Poland intensify expectations of further monetary easing” and continued bond buying by central banks from the U.S. to Japan, which helps boost the allure of Polish debt, he said.

Nine-month forward rate agreements, derviatives used to bet on interest rates, traded 41 basis points below the Warsaw Interbank Offered Rate, signaling bets for almost two more quarter-point rate reductions this year.

Central bank Governor Marek Belka said on March 6 that his 10-member policy panel switched to a “wait-and-see” stance after cutting interest rates to a record low of 3.25 percent, compared with 4.75 percent at the start of November.

To contact the reporter on this story: Maciej Onoszko in Warsaw at monoszko@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net


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