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2Y10Y Yield Curve Pricing In Significant Slowdown in Economic Activity

POLAND
  • The deterioration in Russia/Ukraine conflict have left CEE currencies vulnerable in recent weeks and therefore increased the chances of more hikes from central banks to continue their fight against inflation.
  • Inflationary pressures are now likely to rise in the medium term amid soaring energy prices, with Brent futures (front month) trading above the $110 level.
  • As a result, Poland 2Y10Y yield curve has been falling in recent weeks, currently trading around 0 percent.
  • The yield curve is now pricing in a significant slowdown in the economic activity in the coming months.
  • The chart below shows that the 2Y10Y yield curve has historically strongly led Poland industrial production by 6 months in the past 15 years.

Source: Bloomberg/MNI

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