Polish Yields Rise to 4-Month High Amid Emerging-Market SelloffMaciej Onoszko
Polish bond yields advanced to the highest since Sept. 10 after the U.S. Federal Reserve said it would continue to withdraw monetary stimulus, extending a rout in emerging-market assets.
The yield on Poland’s five-year notes surged as much as 22 basis points before rising 10 basis points to 3.93 percent as of 4:58 p.m. in Warsaw. The premium investors demand to hold 10-year bonds over similar-maturity German securities jumped to 291 basis points, the highest since November 2012.
Fed policy makers trimmed monthly bond purchases by $10 billion to $65 billion yesterday. Emerging stocks extended the worst start to a year since 2008 today and most of the region’s currencies fell as data showed China’s manufacturing contracted for the first time in six months in January.
“This is slaughter, a classic risk-off that we haven’t seen for quite some time,” Lukasz Witkowski, who manages 4.6 billion zloty ($1.5 billion) in fixed income at Warsaw-based mutual fund PKO TFI, said by e-mail. “The Fed’s decision, while expected and neutral for the U.S. market, is bad information for emerging markets, where sentiment is weak.”
“Many” investors are also selling Polish government bonds because of “uncertainty concerning liquidity” as the government plans to seize assets held by pension funds on Feb. 3, according to Arkadiusz Bogusz, managing director at Ipopema Asset Management in Warsaw. The government will take over and cancel 51.5 percent of 299 billion zloty in assets held by privately managed pension funds, mostly sovereign bonds, to reduce public debt.
Poland’s gross domestic product grew 1.6 percent from a year earlier compared with 1.9 percent in 2012, the Central Statistical Office in Warsaw said in a preliminary report today. That topped the 1.5 percent median estimate of 31 economists in a Bloomberg survey and matched an 11-year low reached in 2009.
“This certainly weighs on short-term bonds,” Bogusz, who oversees the equivalent of $1 billion in assets, said by e-mail. “A better reading may suggest some positive surprises this and next year.”