Since the start of the interest rate hike cycle, Polish government bonds have been gaining increasing popularity — naturally, this results from the improved offer, which has long been competitive compared to their main rival, i.e. bank deposits or savings accounts, thanks to the ease of investing and low risk of capital loss.
What are bonds?
Simply put, buying a bond means “lending” money for a fixed period while agreeing on a specific interest rate in exchange for depositing your funds with the issuer.
The issuer can be a company, but it can also be the state — and that’s the type we’ll discuss here: government bonds.
Are government bonds safe?
Government bonds are considered low-risk investments. Why?
- High liquidity – even if you buy 2-, 3-, 4-, or 10-year bonds, there’s no problem selling or redeeming them earlier.
- You don’t receive an explicit guarantee of getting your full capital back, but for you to lose your money, the state would have to default on its obligations in its own currency.
- The risk of the government failing to repay bondholders is estimated to be roughly the same as losing money on a bank deposit, i.e. close to zero.
Why is that?
Bank deposits are protected by the Bank Guarantee Fund (BFG) up to the equivalent of €100,000 per bank.
If a smaller bank fails, the BFG can usually handle the payouts.
For larger institutions, however, the State Treasury steps in to support the process — and the State Treasury is, in fact, also the issuer of government bonds.
So, in both cases, it’s ultimately the government that stands behind the security of your money — hence the similar level of risk between deposits and government bonds.
You can check the current government bond offerings on the official website dedicated to them.
We’re not listing specific offers here — we don’t know when you’ll be reading this post! 😁
