Zloty Holds Gains, POLGB Yield Curve Bear Steepens

EUR/PLN continues to trade with a bearish bias, last sitting -75 pips at PLN4.6815, with familiar technical contours intact. USD/PLN trades -156 pips at PLN4.4135, with bears keeping an eye on Dec 15 low of PLN4.3667.

• Local-currency bond yields sit 7.0-14.6bp higher, curve runs steeper as we type, with benchmark 10-year yield hitting three-week highs. Poland/Germany 10-year yield spread has widened today, albeit it remains in fairly close proximity to recent cyclical narrows.
• BNP Paribas revised their interest-rate forecast and now expect the NBP to leave its policy rate at 6.75% through the end of 2023 (previous call was for an increase to 8.00%). They estimate the risk of a resumption of the rate-hike cycle at less than 50% and note that the space for rate cuts will open only in 2024, with the central bank expected to deliver 125bp worth of easing within the next 24 months.
• A growing choir of local sell-side desks see a medium-term stabilisation in interest rates, with the focus of the debate shifting towards the timing of initial cuts. The market is still pricing rate cuts by the end of next year, albeit the implied odds of such a scenario have decreased this month.