Zloty Pares Decline in Worst Month Since May, Bond Yields Fall

The zloty had its worst month since May and yields on benchmark 10-year bonds increased the most in 16 months in January as Poland’s economic growth decelerated.

The zloty strengthened less than 0.1 percent to 4.1954 at 6:15 p.m. in Warsaw, paring its monthly slump to 2.8 percent, the worst performance among the 10 emerging currencies in Europe, the Middle East and Africa after the South African rand. The yield on 10-year government bonds fell three basis points, or 0.03 percentage point, to 3.93 percent, up 19 basis points this month in the biggest increase since September 2011.

The repricing gained pace after the Central Statistical Office released data showing that December’s retail sales slumped to the worst level since 2005, stoking bets on further interest-rate cuts. A decline in German unemployment helped lift markets today and suggested that economic growth in Poland’s biggest trading partner was gathering pace.

“The German data added relief to the market and we see much activity from local investors,” Adam Kruss, Warsaw-based head of trading at Raiffeisen Bank Polska SA, said by phone. “Investors are rearranging their positions on different maturities, betting on future rate cuts.”

Non-resident holdings of Polish bonds jumped by 2.2 billion zloty ($712 million) in December to a record 189.9 billion zloty, and inflows of foreign capital accelerated in January, Piotr Marczak, head of the Finance Ministry’s public debt department, said in an e-mailed statement today.

The Finance Ministry sold 300 million euros ($408 million) of 20-year bearer bonds to German investors in a private placement, Marczak said. The securities were priced to yield

3.359 percent, or 10 basis points less than existing euro-denominated notes due in 11 years, the statement said.

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