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Polish Bond Yields Fall to One-Month Low as Inflation Declines

June 13 (Bloomberg) -- Polish bonds rose, pushing yields to the lowest in more than a month, after a report showed the inflation rate fell more than estimated.

The yield on two-year notes declined four basis points, or 0.04 percentage point, to 4.74 percent, the weakest level since May 10, as of 3:41 p.m. in Warsaw, according to data compiled by Bloomberg.

Polish consumer-price growth fell to 3.6 percent in May, the slowest annual pace in 15 months, the statics office said today. It was below the 3.8 percent median estimate of 26 economists in a Bloomberg survey, following a report last month that showed European Union’s largest eastern economy expanded at its slowest pace in two years in the first quarter.

“Today’s inflation coupled with deteriorating data from the real economy increase a chance that the central bank will stick to its wait-and-see strategy and keep rates unchanged till the end of the year,” Piotr Piekos, an economist at Bank Pekao SA, wrote in an e-mailed comment to clients.

The Polish central bank unexpectedly raised interest rates last month and warned it may tighten policy further if inflation fails to slow and the economy avoids a sharp slowdown.

Polish central bank policy maker Jan Winiecki said he is “concerned” about a decline in economic growth in the first quarter, adding that the economic slowdown should be taken into account while setting interest rates in an interview today on TVN CNBC.

Six-month forward rate agreements fell to seven basis points below the three-month Warsaw Interbank Offered Rate, indicating a growing chance of a rate increase by the end of this 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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