Polish Bonds Rally on New Call for Rate Cut Amid Slower Growth
The yield on Poland’s 10-year bonds fell to a record low, making April the best month for the notes since November 2008, after policy maker Jerzy Hausner said the central bank will consider cutting rates further.
Policy makers will “certainly” think about cutting the reference rate in May from a record-low of 3.25 percent, Jerzy Hausner told Dow Jones Newswires in an interview today. The comments follow a reduction in this year’s economic growth target by the Finance Ministry today and a call for lower borrowing costs from fellow policy council member Andrzej Bratkowski last week.
“We think the central bank will cut interest rates further by 25 basis points in June,” Guillaume Tresca, a Paris-based senior emerging-markets strategist at Credit Agricole SA (ACA), said by phone today, adding “risks are tilted toward further cuts.”
The yield on 10-year government securities fell four basis points, or 0.04 percentage point, to 3.38 percent at 6:27 p.m. in Warsaw, dropping for the fourth day and extending this month’s decline to 56 basis points. The zloty depreciated less than 0.1 percent to 4.1057 against the euro, erasing gains of as much as 0.3 percent earlier in the day.
Poland’s economic growth will slow to 1.5 percent this year from 1.9 percent in 2012, Ludwik Kotecki, chief economist at the Finance Ministry, said at a news conference in Warsaw. The general government deficit narrowed to 3.9 percent of gross domestic product in 2012, missing the government’s 3.5 percent of GDP target, Finance Minister Jacek Rostowski said.
Nine-month forward rate agreements, derivatives used to speculate on interest rates, traded 68 basis points below the Warsaw Interbank Offered Rate, showing a scope for almost three quarter-point cuts.
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