Financial market

Annual Report

Interest rate market

In 2021, the profitability of Polish bonds increased rapidly. Profitability of 2-year bonds reached 3.35%, starting from nearly null as at the beginning of the year, and 10-year bonds reached 3.71%, which is a change of nearly 2.5 p.p. This was the result of a strong increase in PPI and CPI inflation accompanied by concerns about “de-anchoring” inflation expectations from the long-term targets. This situation motivated NBP to introduce significant changes in the monetary policy. The central bank also decided about reference rate increases from 0.10% to 1.75% in total as at the end of 2021, which raised the 3M WIBOR to 2.54%. The increases in returns on bonds were also seen abroad, although on the main markets – USA and Eurozone – they were not as conspicuous as in Poland. Higher volatility of quotations on the Polish debt market resulted mainly from the relatively strong increase in inflation, which amounted to 8.6% at the end of the prior year.

Currency Market

The year 2021 brought weaker PLN against USD and a symbolic change in relation to the EUR. The reinforcement of the USD and constant uncertainty related to the development of the pandemic had a negative impact on the currencies of emerging markets. The US currency benefited from the market increase in interest rates together with the process of limiting the purchase of assets initiated by the Fed. Deeply negative real interest rates which dropped as a result of a strong increase in inflation (an average yearly increase of 5.1%), had a negative impact on the PLN. Only the interest rate increases initiated by the MPC in the fourth quarter reinforced the Polish currency. The PLN exchange rate was also affected by the conflict with the European Union which resulted in the lack of approval of the National Reconstruction Plan, due to which Poland did not receive any financing from the EU Recovery Fund in 2021.

Stock Market

The year 2021 was beneficial for stock holders, including those investing on the WSE. At that time WIG gained nearly 22%. Following several difficult years, the banks’ securities brought considerable profits – the WIG index for Banks went up by more than 80%. Although the world still wrestled with the COVID-19 pandemic, investors focused on strong economic revival, which translated into the visible recovery of corporate profits. At the end of the year, the stock market felt the burden of global changes in the monetary policy driven by growing inflation pressure. Nevertheless, the financial conditions remained relatively mild, which in combination with solid current and forecast macroeconomic indicators encouraged stock investments

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