Economics

First-Ever Downgrade Shows Polish Power Grab Is Bad for Markets

Commerzbank cuts the nation's Eurobonds to underweight
Rabobank and Capital Economics see zloty testing record low

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By Natasha Doff and Lyubov Pronina

January 17, 2016 at 11:00 PM UTC

Updated on

January 18, 2016 at 1:44 PM UTC

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The cracks are starting to appear in Poland’s image as a haven from the turmoil in emerging markets.

Markets buckled Friday after Standard & Poor’s shocked investors by cutting the nation’s credit rating by one level even though the debt had a positive outlook. The zloty suffered its biggest rout since September 2011, while on Monday the government’s local-currency bond yields jumped the most in more than two years. Commerzbank AG immediately recommended selling Polish Eurobonds, while Rabobank and Capital Economics Ltd. said the currency is headed for record lows.