Compiled by Holger Kron
Deutsche Bank, Frankfurt
Tel: +49 69 9103 4468
While core markets opened weaker, the Polish market started more or less unchanged into this week. This was surprising following last week's comments a the MPC meeting, which cast doubt on the prospect of further rate cuts. Also the IMF said there was no need for further monetary easing, which should have put some pressure on bonds. Friday's release of H1 food data also implied another higher CPI headline data for this month.
However, MPC member Dariusz Rosati said further rate cuts would be possible as long as CPI remains benign and demand recovery remains moderate.
On Tuesday CPI data was released at 1.1 % y/y, the market became more positive and traded up marginally, awaiting tomorrow's (Friday's) monthly food price data, to get another hint on inflationary development.
The currency story remains the main block to foreign investment in the Polish bond market with the zloty this week again tracking movements in the Hungarian forint. Additionally participants are wary about the weakness in global fixed income markets, as continuing bond market weakness could indicate a change of the rate cycle.
Friday's cabinet agreement on the 2004 budget could de-link the Polish bond market from the European one. Additionally, the amelioration of the relationship between MPC and the government is clearly favourable for the currency too.