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T-bonds may suffer profit taking, zloty to stabilize

October 17, 2012
Poland's T-bonds may see yield increases on the long end of the curve as better moods cause capital outflow from safe assets, while Poland's zloty remains stable Wednesday morning and is expected to remain so by the release of September industrial output data, local players told PAP. 

"For weeks we have been treated . . . as a safe haven and in the situation in which the market forecasts that systemic solutions are closer, yields may go higher," BNP Paribas FI trader Blazej Wajszczuk told PAP. "Lately our bonds have been following German Bunds, which was also visible yesterday."

Among factors which improved sentiment, the trader enumerated a low inflation reading in the US, which will allow the Fed to continue stimulating the economy, rumors about help for Spain being close as well as better-than expected ZEW reading and good results of companies in the US.

The Polish FI market is prone to a correction, "as most players are long in T-bonds and have a positive P&L on the papers, which makes the temptation to take profit before end-year strong," Wajszczuk pointed out, adding that a potential weakening "is rather not a change in trend."

As for the Wednesday industrial output reading, a weak result may only hypothetically support the short end, as the general macro conditions take precedence over this piece of domestic data: the figure might lead the market to price in a 50 bps cut in November but is unlikely to change perception of the scale of rate cuts in the cycle, the trader noted.

On the FX market, the zloty is expected to stabilize, BPH FX dealer Andrzej Krzeminski told PAP.

"The zloty is stable this morning, with EUR/PLN at 4.09 and USD/PLN at 3.12, and will remain at these levels until the industrial output data," Krzeminski said. "If the data turn out to be worse than expected we may see a zloty weakening, while in the case of better than expected figures we will see its strengthening towards EUR/PLN 4.06."

Poland's stats office GUS is scheduled to announce September industrial output data and PPI on Wednesday.