That creates opportunity. Poland's economy is still a work in progress, but the Poles hope to join the EU by 2005 and European Monetary Union before the end of the decade. As those economies fell into line with the rigorous EMU criteria, their interest rates and inflation fell, driving up the price of their old high-yield debt, as investors sought its high coupon. Poland offers even more profit potential because its rates are much higher than Italy's and Spain's were when the EMU countdown started. Poland may not qualify for the euro for eight years.
Foreigners buy twice as much Polish debt each month as they did last year.
It's in a new asset class between the emerging markets and the G7, where the returns are high and the risks limited. That's why it is so attractive. Poland isn't the only convergence play. The Czech Republic and Hungary are also EU candidates. But their rates are lower because their economies are more developed, so the profit potential is less.