Poland’s 10-year bond yields fell to a record after Moody’s Investors Service said “strong” demand from foreign investors will continue to push borrowing costs lower.
The yield on October 2023 notes slid four basis points, or 0.04 percentage point, to 4.10 percent as of 5:48 p.m. in Warsaw, extending this week’s drop to 14 basis points. The zloty weakened 0.2 percent to 4.1033 per euro, the fourth-steepest decline among 31 major currencies tracked by Bloomberg.
Prime Minister Donald Tusk’s government has harnessed foreign demand for its bonds to raise 20 percent of next year’s borrowing needs. International buyers with a record 35 percent holding of zloty-denominated government bonds have been lured by economic growth and a pledge to reduce budget deficit.
Poland’s “prudent approach to increasing its liquidity buffer decreases rollover risk, and the lower funding costs reflect its status as a regional safe haven in Central and Eastern Europe,” Jaime Reusche, an analyst at Moody’s in New York, said in an e-mailed report late yesterday.
The rating company expects “further improvements in Poland’s credit profile” because of its “prudent” debt management and “credible” fiscal policy, according to the note. Moody’s rates Poland A2, the sixth-highest investment grade, according to data compiled by Bloomberg.
Bonds also continue to benefit from expectations for interest-rate cuts as the economy slows. Growth may be weaker than the 2.2 percent envisaged in the 2013 draft budget, Tusk said at a news conference yesterday.
Investors in interest-rate derivatives expect 100 basis points in cuts over the next 12 months after the central bank reduced rates for the first time since 2009 on Nov. 7, according to data compiled by Bloomberg.
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