Polish 10-year bonds advance, zloty recovery lures investors

March 30 | Updated: Mar 31 2006, 05:30am hrs
Polish bonds rose in tandem with the zloty as concerns eased among foreign investors the currencys weakness would fuel inflation and harm investor returns. The zloty fell to a four-month low on Wednesday on concern interest rate increases by the US Federal Reserve and European Central Bank eroded the yield attraction of the currency. Weaker currencies erode foreign investor returns and fuel inflation through higher import costs.

The zloty is the driver, said Jon Harrison, an emerging-markets strategist at Dresdner Kleinwort Wasserstein in London. Theres a relief as it happened in a lot of emerging markets. And thats helped bond market sentiment.

The yield on Polands 6.25% bond due October 2015 fell 2 basis points to 4.98% in Warsaw. Yields on Polish 10-year bonds are near the highest since February 2. Its price rose 0.10 or 1 zloty per 1,000 zloty face amount, to 109.45.

Hungarys 8% bond due February 2015 yielded 7.10% in Budapest, down 2 basis points from Wednesday. Its price rose 0.13, or 13 forint per 10,000 forint face amount, to 105.75. The yield touched a 13-month high of 7.17% on March 14, according to available data.

The zloty was little changed at 3.94 per euro in Warsaw after strengthening to as high as 3.93 earlier. It fell to 3.97 per euro on Wednesday. The forint was little changed at 266.20 per euro in Budapest, after rising to as high as 265.19 earlier.

Bloomberg