Polish government bonds are described as relatively under-owned versus Hungarian paper, with bond holdings halving as eurozone yield-curve steepening and concerns about fiscal risk weighed on returns. At the same time, eurozone holdings have dropped to their lowest level this year, leaving positioning light and potentially sensitive to any shift in flows.
Inflation Dynamics and Central Bank Policy
Inflation dynamics are mixed: Poland has the highest headline inflation in CEE on a year-on-year basis, yet core inflation is reported to be flat even with household subsidies in place. This combination is linked to a conservative tightening path from the National Bank of Poland (NBP), although elevated headline readings raise the risk that inflation expectations could become unanchored.
Fiscal Reform and Market Outlook
The note frames prospective fiscal reform as a potential catalyst for lower borrowing costs, with real rates, NBP hawkishness and peaking inflation cited as factors that could support performance and create asymmetrical upside given the low level of external holdings.
