Interest rates on 10-year bonds Polish government is close to the historic low of 3.08 percent. In the coming days or weeks, the bonds can break the barrier of 3 per cent., Which favors the first since 1989. Deflation and uncertainty about GDP growth in the second half. In the medium and longer term, however, analysts expect growth yields on Polish bonds because inflation will slowly closer to the NBP, which is 2.5 per cent.
– We have two main factors. Firstly, inflation is falling, according to recent data from the Central Statistical Office in July we had deflation minus 0.2 percent. year to year. In addition, Russia imposed sanctions, which means that the hole that he had achieved the CPI in July, will be reached in August at a lower level. It awakens investors’ expectations for interest rate cuts. At the moment, the market discounted 50 basis points cut in this year – says in an interview with the news agency Newseria Investor Dr. Miroslaw Budzicki, strategist financial markets in PKO BP SA.
At the July meeting of the Monetary Policy Council members opted for a reduction in interest rates in the near future, if deflationary trends persist and the economy will slow significantly – according to a press release of the NBP. According to some economists, the MPC may decide to loosen monetary policy in September.
A low bond yields and downward pressure on the NBP interest rates also stems from the policy of the European Central Bank, which decided to introduce an extraordinary tool to stimulate economic situation in the euro area (including long-term credit lines to banks and a negative deposit rate). The ECB has not ruled out a run buying ABS ( asset-backed securities ), and it still will increase the interest rate disparity between Polish and Euroland, which in turn can lead to the strengthening of the zloty, and consequently aggravate deflation – according to “minutes” of the MPC.
– It seems to me that the coming weeks will continue to be a continuation of the current trend. It is possible that the market will be discounted even cut interest rates by another 25 basis points. From this point of view, there are still possible, despite the very low yields, further declines in profitability, or increases in prices – believes Budzicki.
On Friday, yields on 10-year Treasuries Polish was about 3.1 percent., While the French – 1.37 per cent., And German – 0.98 percent. Even if the reference rate would fall by 50-75 points. base to 1.75-2 per cent., the long-term bond yields of the Polish government did not approach the levels that are currently the most important economy in the eurozone.
– We are dealing with a different economy, we are an emerging market. Naturally we will list a higher premium to German securities. We also have to decide higher interest rates and a completely different macroeconomic situation. Rule out such a sharp decline. However, in the coming weeks, yields on 10-year bonds will be tested level of 3 percent. and it is possible that it beat – forecasts of the financial markets strategist at PKO BP.
close the record prices of Polish debt increase investment risk, as exemplified by the sale and implementation of short-term profits at the end of July and August. The pretext for the fall in bond prices – that is, increase their profitability – may be the lack of interest rate cuts in September or optimistic data from the Polish economy, which dramatically reduce the chance of easing monetary policy. According to the projection of the NBP inflation should gradually increase in the coming quarters, which in the long term will lead to a decline in bond prices.
– I think that in the coming weeks, the yield may even decrease. From the point of view of an investor should hold bonds in the short term, while in the medium and long in my opinion they lose – predicts Dr. Miroslaw Budzicki.
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