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Polish Yields Drop as Manufacturing Shrinks for Seventh Month

Oct. 31 (Bloomberg) -- Poland’s five-year bond yields fell after a report showed manufacturing contracted for a seventh month, bolstering the case for a cut in interest rates at a monetary policy meeting next week.

The rate on notes due in April 2017 fell five basis points, or 0.05 percentage point, to 4.08 percent as of 5:26 p.m. in Warsaw, snapping two days of gains. The zloty weakened 0.1 percent to 4.1351 per euro, extending this month’s loss to 0.5 percent.

The five-year bonds are heading for a fifth month of gains as mounting evidence of an economic slowdown increases the probability of a cut in borrowing costs. The Purchasing Managers’ Index for Poland, a gauge of manufacturing performance, stayed below the level indicating expansion while rising to 47.3 percent in October.

“The data is rather negative,” Adam Antoniak, a senior economist at Bank Pekao SA in Warsaw, wrote in an e-mailed note to clients today. “It adds to an overall picture of economic slowdown in Poland and give another reason for rate cuts.”

The report is the last piece of macroeconomic data released before the central bank’s rate-setting meeting on Nov. 7. Policy makers will trim borrowing costs by 25 basis points to 4.5 percent, according to a median estimate in a Bloomberg survey of 20 economists.

A cut in interest rates now would be a “natural” consequence of the slowdown, Governor Marek Belka was reported as saying in Gazeta Wyborcza on Oct. 25.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at

To contact the editor responsible for this story: Gavin Serkin at

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