Poland: long end yields may rise, despite more rate cuts

Poland’s monetary easing cycle has dragged down short-term government bond yields, but unlike in past cycles, long-term yields haven’t come down very far. Even with the policy rate now likely to fall to 3.50% next year, given the backdrop of underlying inflation pressures, loose fiscal policy and rising public debt, we think the balance of risks is towards a higher, rather than lower, 10-year yield in the next few years.