Low interest rates on Polish bonds help fund fight against COVID-19

The record low interest rates on Polish bonds on the financial markets means that the national debt incurred will be relatively cheaper to service

editor: REMIX NEWS
author: Forsal/PAP

According to Piotr Arak, the Director of the Polish Institute of Economics, the rates of interest on Polish bonds have been falling for months, which means that the Ministry of Finance is able to offer a lower rate of return for investors.

On Tuesday, the rate of return on two year bonds was 0.025 percent and on five year bonds it was 0.58 percent. Only ten year bonds fetched a rate of return of 1.35 percent. Back in March, that rate of return was on average one percent higher.

The rates of return being offered on Polish bonds are now near those of the eurozone, which is a signal that they are being perceived as a safe investment. 

They are also more attractive than negative returns on German bonds (-0.7 percent) as they guarantee at least some profit. But of course German bonds are still seen as a very safe investment compared with the other end of the spectrum where, for example, Turkish bonds (13 percent) and Ukrainian bonds (10 percent) are found.

Piotr Arak reminded the Polish Press Agency (PAP) that when Poland joined the EU, its bonds were fetching a return of 13 percent for investors. This implied considerable costs of servicing the budget deficit.

Today, the picture is radically different, which will be extremely useful for the government in its fight against the recession which has been caused by the pandemic.

According to the Ministry of Finance, Poland’s public debt has risen by five percent on the last quarter and by nearly 11 percent on 2019 figures.

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