Polish Two-Year Bonds End Rally Amid Rebound in Global Stocks

  • Yields rise from record low after falling 52 basis points
  • Bank tax plan spurred demand for bonds over central bank bills

Polish bonds ended a three-week rally that pushed the yield on two-year notes to a record low amid the worst start to a year for emerging-markets since 1998.

The yield on notes due October 2017 rose three basis points to 1.38 percent at 4:45 p.m. in Warsaw after dropping to a record 1.31 percent earlier on Wednesday. The advance shaved 53 basis points off two-year yields since Dec. 22 as local banks boosted holdings of government securities and investors raised bets a new crop of central bankers will cut borrowing costs.

Expectations the benchmark 1.5 percent rate will be lowered rose as candidates to join the bank’s Monetary Policy Council said Tuesday they’d be eager to support economic growth. The ruling Law & Justice party has also exempted government securities from a bank tax that will probably take effect as early as next month, spurring demand for notes that can be seen as an alternative investment to central bank seven-day bills. The rally was stopped as crude oil prices advanced for the first time in 2016, while emerging-market equities rose the most in three weeks.

The move in Polish two-year bonds was “quite big, so the market deserved a break and some profit-taking.” said Marcin Karasiewicz, a fixed-income trader at Poland’s largest lender PKO Bank Polski SA. “This is the first day in a while when crude oil is up and stock markets are stable.”

The zloty rose 0.6 percent to 4.3339 per euro, paring the loss for this year to 1.7 percent. Poland will appoint eight out of 10 new monetary policy makers for six-year terms in the coming weeks. The outgoing panel is meeting for a final time today and on Thursday with all 37 economists surveyed by Bloomberg expecting no change in rates.

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