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Polish 5Y T-bonds hit all-time highs, zloty under pressure

October 10, 2012
Polish 5Y fixed-rate T-bonds hit all-time highs, with yield at some 4.16%, while zloty lost some ground on PM Tusk comments that an FX rate of EUR/PLN 4.50 would be safe for the economy, local players told PAP. 

"Today we have yield declines on the market, PKO BP chief trader Marek Kaczor told PAP. "The moods are good, morning statements by rate setters were a reminder that we might expect rate cuts.

"It is not ruled out that should we see weak data from the economy, such as output, then the market may place bets on a 50 bps cut," he said.

The markets may see further yield declines in coming days, although markets will also listen to the speech by PM Donald Tusk on Friday.

"Yield declines may continue in coming days," Kaczor said. "The market is waiting for Friday PM expose. It is hard to say what to expect."

"Looking at market sentiment and its strength, it would be hard to stop that yield rally, although PM speech is a risk factor," he said.

The zloty suffered somewhat after PM Tusk comments on the zloty.

"The zloty has been under pressure for the bigger part of the day," Raiffeisen bank FX dealer Rafal Uss told PAP, pointing to "PM's comment about PLN 4.50 against the euro being a safe level for the economy. The zloty reacted with weakening."

In the coming days the zloty could weaken to EUR/PLN 4.12, according to the dealer.

"PLN 4.12 against the euro is a strong resistance level. The support is at PLN 4.05," he said. "In my opinion the zloty will try to test levels above 4.10, towards 4.12, which could represent a good opportunity to buy and to return in the neighborhood of 4.05-4.06."

"When it comes to the next MPC decision, the next sitting could bring a rate cut . . . it is already priced in," he added. "What is important is the scale and timing of the following cuts."