What has been happening in the Polish financial market for the last few days looks more intriguing. We are dealing simultaneously with an apparent rebound in the bond market and a weakening of the zloty. On Wednesday, the euro went up by 7 gr and returned to PLN 4.70.
Polish bonds are growing accelerated, meaning their price is increasing, and their profitability is decreasing. This is a reversal of the situation of recent months. The yield on 10-year bonds since the beginning of the year rose from 3.7 percent to 8.18 percent. However, it has fallen by more than 100 bps in just two days since Tuesday to 7.16 percent.
Such a sudden drop in yields may mean that the market is rapidly changing its view of what will happen to the economy and interest rates. A substantial slowdown or even recession seems increasingly likely. In such a scenario, the NBP may end the cycle of interest rate increases sooner, and it was the expectation of further increases that pulled bond yields upwards earlier.
Why is the market changing its view right now? Because in the last few days, several macroeconomic data appeared that were worse than expected, e.g., salaries, employment, and industrial production, suggesting that the economic slowdown in Poland has already started.