Poland Fails to Sell Out Auction as Yields Rise, Zloty Advances

Poland failed to sell out a government bond sale as yields followed rates on U.S. Treasuries higher. The zloty strengthened for a second day.

The Finance Ministry sold 2.42 billion zloty ($796 million) of securities due July 2025 and rejected all bids for April 2028 notes, falling short of its plan to sell as much as 3 billion zloty, it said in an e-mailed statement. The yield on benchmark zloty bonds due in October 2023 increased three basis points to 3.49 percent, the highest since June 23 on a closing basis. The zloty appreciated 0.1 percent to 4.1425 per euro at 3:16 p.m. in Warsaw.

“Demand wasn’t ravishing” at the auction, Arkadiusz Urbanski, a fixed-income analyst at Bank Pekao SA, said by phone. “Foreign investors probably were a bit more careful” after an increase in yields on U.S. debt, driven by fears of policy tightening by the Federal Reserve, he said.

The rate on 10-year Treasuries increased 15 basis points in the last three days to a two-month high of 2.67 percent. The securities fell on continued strength on the U.S. jobs market, which is fueling bets that economic growth is gaining momentum.

The European Central Bank kept its main refinancing rate unchanged at a record low of 0.15 percent today, as predicted by all 54 economists in a Bloomberg News survey.

Poland’s central bank kept its key interest rate at record-low 2.5 percent yesterday and retracted a pledge to keep borrowing costs unchanged at least until the end of the third quarter. Governor Marek Belka said the probability of a rate cut in September was “very low.”

“The rates decision is more important for short-term bonds, which have positive prospects as Poland will enter a period of deep, yet short-term deflation,” Urbanski said. “The U.S. jobs data today could spark more hawkish comments” and push yields on bonds with longer maturities higher.

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