Polish 10-year bond yield crosses 4-year mark

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Polish 10-year bond yield crosses 4-year mark

By Alan Charlish Jan 7, Jan 7 Reuters -- The Polish 10 year bond yield crossed the 4% mark for the first time since 2014 on Friday, as a surge in inflation builds expectations for further policy tightening in the largest economy in the European Union's eastern wing. Poland's central bank hiked its main interest rate by 50 basis points to 2.25% on Tuesday and signalled there was more tightening to come, according to the data showing the consumer price index hit a two-decade high of 8.6% in December. Piotr Bartkiewicz, economist at Pekao in Warsaw, said that the market sees it as the market is pricing in a scenario in which interest rates in Poland reach 4% and remain at elevated levels for many years. By 1156 GMT, the Polish 10 year yield was up almost 14 basis points at 4.042%. The Polish zloty was little changed, with analysts saying that expectations for tighter conditions have been largely priced in. After a significant strengthening in the past few days, the zloty should stabilise, according to Bank Millennium analysts. The zloty's inflation data should support the zloty, but it appears that investors have priced-in to a large extent the scenario of further interest rate hikes. The zloty was 0.08% weaker against the euro at 4.5570. The Czech crown went up 0.10% to 24.487 and the Hungarian forint was the best performing currency, strengthening 0.34% to 358.70. Hungarian currency shrugs off a pause in the central bank's weekly rate hikes. At its weekly tender on Thursday, the bank left its one-week deposit rate at 4%. The decision is a sign that the central bank's reaction function is asymmetrical, skewed towards offsetting FX depreciation through rate hikes, but keeping a steady hand when FX appreciates, Morgan Stanley wrote in a note. In case FX continues to appreciate we think there is a chance that the NBH National Bank of Hungary will keep hiking the base rate alone, while keeping the 1 week depo rate unchanged. 0.52 2.40 t WIG 20 Warsaw WIG 20 -- 0.17% 1.77 BETI Buchare 13194.