Poland narrowly avoids political crisis
Currency, markets rally on Monday’s news
A controversial policy proposal that triggered the longest run of street protests since the waning days of Poland’s communist regime has been vetoed by President Andrzej Duda, reports Marcus Ashworth for Bloomberg Gadfly.
The country’s currency, the zloty, along with bond and stock markets all rallied on the news. The news is welcome even as investors’ bullish stance on Poland for this year was not significantly threatened by the crisis. 4% economic growth in the first quarter has helped push the country’s benchmark WIG20 index jump 20% this year, a bigger increase than seen on the Budapest Stock Exchange or the Czech Republic’s PX index.
While the yields on Poland’s 10-year government bonds are still higher than any euro zone economy outside of Greece, the lowering of political tensions will likely see yields continue to fall. A 275 basis point pickup relative to German yields, along with minimal currency risk versus the euro, should be a major attraction for investors, says Ashworth.