March 16, 2020 / 12:47 PM / 20 days ago

UPDATE 2-Polish pumps $1.8 billion into bond market

(Adds amount of operation)

By Alan Charlish

WARSAW, March 16 (Reuters) - The Polish central bank (NBP) provided 7.26 billion zlotys ($1.84 billion) to banks in a repo operation, it said on Monday, an extraordinary measure to improve liquidity in bond markets and reassure investors shaken by the coronavirus pandemic.

Some analysts expect the central bank to cut interest rates for the first time in five years at a meeting on Tuesday, a sign of the stress the Polish economy is facing.

Polish forward rate agreements are currently pricing in more than three 25-basis point cuts to the 1.5% benchmark rate this year.

“They announced a reverse repo, so they are ready to provide liquidity if anyone needs it,” a Warsaw-based bond dealer said.

“This is in their regular tool pack but I don’t think they ever used this or if they did use it, it was post-Lehman Brothers,” the dealer said, referring to the collapse of the investment bank.

The minimum interest rate for the four-day repo operation was 1.5%, according to Refinitiv Eikon data.

“This kind of operation is aimed at supporting liquidity on the bond market, as there was no liquidity there. Banks are giving the central bank bonds as a collateral,” said Grzegorz Maliszewski, chief economist at Bank Millennium.

Krystian Jaworski, senior economist at Credit Agricole in Warsaw, said the operation was designed to reassure markets.

“This a way of the NBP saying to the markets and investors that everything is OK, that they keep a close eye on the situation by providing liquidity for the banks and ensuring banking sector stability,” he said.

Reuters was unable to immediately contact the central bank press office for comment. Details of the operation are available on Eikon at

At 1401 GMT the Polish zloty was down 0.83% against the euro at 4.4120. Benchmark 10-year yields were up 40 basis points at 2.238%. ($1 = 3.9403 zlotys) (Reporting by Alan Charlish, Alicja Ptak, and Marcin Goclowski; editing by Larry King, Kirsten Donovan)

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