Polish Yields Jump to Two-Month High as Rate Cut Prospects Fade

Polish bond yields rose to the highest level in more than two months as policy maker Elzbieta Chojna-Duch said the central bank should be “cautious” with further interest-rate reductions.

It’s too late for the Polish central bank to play catch-up on interest-rate cuts as the euro area economy will probably recover in the second half of the year, she told TVN CNBC television in an interview today. Policy makers cut borrowing costs four times since November by a total of 100 basis points to 3.75 percent. Governor Marek Belka said on Feb. 6 that the council will have to “reconsider what we’ve done so far.”

The yield on notes maturing in October 2023 rose five basis points, or 0.05 percentage point, to 4.05 percent at 5:20 p.m. in Warsaw, the highest since Dec. 5. The zloty weakened 0.3 percent to 4.1608 against the euro, extending this year’s decline to 1.8 percent, according to data compiled by Bloomberg.

“My reading” of Chojna-Duch comments is that it’s “less dovish than expected,” Luis Costa, an emerging-market strategist Citigroup Inc. in London, said in an e-mailed note to clients.

Chojna-Duch was among two policy makers on the 10-member council to support a 150 basis-point cut at Dec. 5 meeting, according to the latest voting records on the central bank’s website.

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