During much of 2000, the National Bank of Poland tightened monetary policy by hiking interest rates to squash inflation. Towards the end of that year, with the NBP’s 28-day intervention rate having peaked at around 19%, nominal and real interest rates peaked, as did inflation. The result was irresistible to fixed income investors, attracted both by extremely high interest yields and the prospect of capital gains. As the NBP began cautiously to relax its monetary policy, this triggered an increasing tide of capital inflows. Asset managers reduced or even eliminated their currency hedges. Dedicated emerging market investors raised their asset allocation in Polish bonds, while cross-over investors increased their exposure to what was an off-index investment.