Polish bonds rose for a second day, sending the five-year yield down by the most since June, on speculation a selloff last week spurred by government proposals to reform the pension system was overdone.
The yields on five-year government bonds slumped 16 basis points to 4.01 percent at 5:35 p.m. in Warsaw, after rising to 4.24 percent on Sept. 5, the highest since Sept. 25. The zloty gained 0.2 percent to 4.2708 against the euro, extending its quarter-to-date advance to 1.3 percent, the second-best performance among 24 emerging-market currencies tracked by Bloomberg, behind South Korea’s won.
Yields climbed to the highest level in almost a year last week after the government said it planned to cancel zloty bonds held by privately-managed pension funds and ban the institutions from buying the securities. The funds will keep current assets that they invested in stocks and future contributions to the system by Poles will be “voluntary,” Prime Minister Donald Tusk said on Sept. 4.
The impact on yields last week was “a bit overstated,” said Michal Jochymek, a senior central and eastern Europe fixed-income trader at BNP Paribas SA in Warsaw. “Foreign buyers started bidding more aggressively after the selloff.”
The government’s gross borrowing needs will fall to 131.8 billion zloty ($41 billion) next year from 166.4 billion zloty in 2013, deputy Finance Minister Wojciech Kowalczyk said in a statement Sept. 7.