Standard and Poor’s downgrade after market on January 15 sent the Polish currency tumbling. Following the sell off of the zloty – which lost nearly 2% to the euro in the hours following the announcement, the biggest fall since 2011 – other asset classes followed suit on January 18. Yields on the country's benchmark 10-year bonds had risen 26bp at one point, the steepest rise in over two years, according to Bloomberg.

Analysts are divided on where the market is headed now. Some expect a rebound in the coming weeks, as investors return to a less politicised view of Poland than that which S&P offered. Others suggest lasting damage.

“We expect the EUR/PLN to remain volatile near term, but once the sentiment calms down, the zloty will start gaining,” Bank BGK forecasts. The strong fundamentals of the Polish economy will support the currency's rebound, the analysts add.

The bank was also somewhat sanguine on the debt market. Polish bonds did not weaken beyond the “broad range” of yield fluctuation seen in recent months, it noted. Expectations that the European Central Bank (ECB) will cut its deposit rate should stabilise the market, the analysts add.

However, traders surveyed by Reuters on January 18 do not expect the ECB to act within the next six months. Other analysts are also less convinced that a Polish assets are in for a swift recovery.

“We expect Friday’s damage to be lasting and we see no room for long term zloty recovery,” RBS suggests, noting attempts from officials to calm the market. That included a claim from the hawkish Adam Glapinski, a member of the central bank's MPC, that he is set to be appointed the next governor.

There were also downbeat views on debt. “We think … potential for strengthening is rather limited. We expect the 10Y yield to stay above 3.0% in the coming weeks. What is more, the curve steepening scenario is still valid,” BZ WBK bank writes.