Polish Bonds Advance as Central Bank Tones Down Inflation View

Polish bonds gained, pushing yields on two-year notes lower, after the central bank said zloty appreciation and economic slowdown will help curb inflation in the medium term.

The yield on two-year bonds maturing in January 2014 dropped three basis points to 4.65 percent as of 5:22 p.m. in Warsaw, the biggest decline in three weeks.

While the central bank raised the inflation forecast in its projection released today, Governor Marek Belka said at the news conference that the latest data would “significantly lower” the price growth from previous calculations.

“The market has taken it positively,” Marek Kaczor, head of fixed-income trading at PKO Bank Polski SA said by phone from Warsaw. “A lighter tone of the statement may suggest that the central bankers will become less hawkish going forward.”

The bank said 2012 inflation will average from 3.6 percent to 4.5 percent, compared with its previous projection in November of 2.5 percent to 3.9 percent. Price growth will slow to a range from 2.2 percent to 3.6 percent in 2013, compared with an earlier 2.2 percent to 3.7 percent projection, according to the central bank.

The zloty has strengthened 7.3 percent this year after depreciating 11 percent last year, according to data compiled by Bloomberg.

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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