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Record-breaking decrease of Polish obligations’ profitability

For the first time in history, ten-year-old Polish treasury bonds decreased below 3 per cent. On record-breaking debt prices affected weakness of the Eurozone economies, loose politics of the greatest central banks all over the world and Russian sanctions.

There is a set of factors which, from the perspective of obligations, is fantastically favorable. We have the Monetary Policy Council, which soon is going to start a cycle of interest rates’ reductions, we have a deflation in July for the first time from many years, and probably in August it is going to happen again. Moreover, we also have a set of disposable factors, such as sanctions in business contacts with Russia. We have a worsening GDB perspective, partially due to disposable factors like conflict with Russia and embargo – mentions Błażej Wajszczuk, analyst of BNP Paribas.

Boom on the Polish treasury bonds market has been lasting since 2011, when their profitability totaled 5,5-6,2 per cent. Annual correction came in 2013, when the Federal Reserve announced recall of assets purchase program, which led to a strong outflow of capitals from emerging markets. Meanwhile, American Federal Reserve still pursues a very soft monetary policy. Fed keeps interest rates very low. We have the European Central Bank, which decreased interest rates and announced additional printing of money. These are all factors which have an influence on the fact that obligations had a fantastic year – explains analyst of BNP Paribas.

Błażej Wajszczuk judges that the decrease of profitability of Polish government’s ten-year-old obligations to 3 per cent means that the market provides a total reduction of interest rates in Poland by 75 basing points. The Monetary Policy Council is inclined to alleviate the monetary policy by 50 basing points. Furthermore, the European Central Bank does not have any possibility to awaken inflation and increase in GDB. However, very good data coming from American economy causes that the perspective of maintaining interest rates on 0-0,25 per cent level is shortened. All information including monetary side is known by us. Actually, we are wondering why play here. A factor of risk is the fact that the dollar is strengthened and it was a currency by which, in time when Federal Reserve printed additionally money, the investments went along. At the moment, the strengthened dollar causes that this assessment of investments in assets different than dollar is being deteriorated. It seems that this trend of strengthening dollar is ahead us – thinks Błażej Wajszczuk.

Actual obligations’ assessment of the European Union countries is on the very high level, thus an investment risk increases, howeveras expert of BNP Paribas points outmarkets evaluated very strongly bad information coming from economy, and a threat of deflation in the Eurozone may pass quickly, which will undoubtedly cause a bargain of debt. These disinflation factors, about which everybody is talking in the Eurozone, that is the decrease of inflation by 0,3 per cent, is a falsified image. If we do not include prices of energy and food, this increase will total 0,9 per cent. Now we have euro which lost 7 per cent this year in relation to dollar. We may expect that this trend of decreasing prices of food will be dramatically reversed within few months, considering that business conditions for euro will be entirely different. Then we will not be talking about disinflation but inflation processes – says Błażej Wajszczuk.


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