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2Y10Y Yield Curve Close To Inversion

POLAND
  • The 2Y10Y yield curve continues to flatten, currently trading at 8.5bps.
  • The aggressive hikes from NBP in the last two meetings has led to a sharp upside retracement on the short end of the curve, with the 2Y yield up 210bps since the start of October.
  • On the other hand, the rising uncertainty over the economic outlook may limit the downside risk on LT bonds, which has led to a sharp flattening in the past few weeks.
  • We will see if policymakers may react to a potential inversion of the yield curve as it generally tends to act as a strong leading indicator of the economic activity.
  • The chart below shows that the 2Y10Y yield curve has historically led Poland industrial production by 6 months.
  • We smoothed the 2021 April/May Industrial Production due to the base effect.

Source: Bloomberg/MNI

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