Sovereigns tap dollar debt, dovish CEE central banks

Governments in Turkey and Poland made a splash this week as they announced rare dollar bond issues. Turkey appears to be taking advantage of a period of low credit spreads while the decision in Poland follows recent concern among policymakers about the public finances (which will be aided by borrowing at lower interest rates in dollars). More sovereigns may follow suit.

Meanwhile, the streak of dovish central bank decisions continued this week as Poland's central bank left rates unchanged and Romania's slowed down tightening. Policymakers are clearly becoming more concerned about the bleak economic outlook, but we think interest rates will need to stay high for some time if central banks want to prevent high inflation becoming entrenched.