Polish 10-Year Bonds Rally as BNP, Raiffeisen Recommend Buying

Poland’s 10-year bonds gained as BNP Paribas SA and Raiffeisen Research recommended investors buy the debt on prospects for a stronger zloty and an improving economy.

The yield on the bonds maturing in October 2020 dropped five basis points to 5.97 percent at 4:40 p.m. in Warsaw. The yield declined 16 basis points this week, the best performance since the period ending Aug. 20. The yield will fall to 5.8 percent by the end of December, according to Raiffeisen. The yield around 6 percent offers “value,” BNP wrote in a note to clients today.

Bonds rallied this week from the lowest level since February and the zloty climbed from its weakest close in more than four months on Nov. 29 after a report showed Poland’s economy grew 4.2 percent in the third quarter, the fastest pace in two years. European Central Bank President Jean-Claude Trichet said yesterday policy makers extended stimulus measures to stem “acute” market tensions, following Ireland’s decision last weekend to take an 85 billion-euro ($114 billion) bailout.

“Financial markets calmed down after the Ireland woes,” Marcin Kopaczynski, an analyst at Raiffeisen in Vienna, wrote in an e-mailed report today. “Given the strong fundamentals of the Polish economy we could see a pickup in both the zloty and government bonds.”

Bonds slid last month as concerns grew that the European Union will fail to stem the crisis and Poland postponed a sale of yen-denominated debt to the next year because of the “volatile bond market.” The government raised more than planned at this week’s sale of two-year bonds as yields at an almost seven-month high attracted investors and speculation declined the central bank will raise interest rates.

Zloty Rally

The zloty advanced for a fourth day today, extending gains to 3 percent against the euro since Nov. 29 as government officials signaled the support for the country’s currency.

The central bank might step into the market if there is “major turbulence,” Finance Minister Jacek Rostowski was quoted as saying by PAP newswire yesterday. Poland is continuing to “take advantage” of a weaker zloty to exchange part of about 5.6 billion euros, Piotr Marczak, head of the ministry’s public debt department, said on Nov. 29.

“We continue to suggest coming back to Polish government bonds,” BNP’s emerging-market strategist including Bartosz Pawlowski in London wrote in a report today. “Investors will be comfortable with long-bond exposure” after the zloty’s rally this week, he said.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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