Treasury versus corporate bonds: differences, returns and risks

What are we comparing?

Treasury bonds are liabilities of a government; corporate bonds are liabilities of a particular business. In both cases investors lend money and hold rights defined by issue documents. Repayment sources and the risks to examine differ. This explains mechanics rather than selecting an instrument for an individual.

This guide compares Polish retail Treasury savings bonds with business-issued bonds, including Catalyst-listed instruments. The State Treasury also issues exchange-traded bonds, with market prices and different early-exit mechanics. Retail early-redemption rules do not apply to every Treasury bond.

Issuer and repayment risk

For Treasury bonds, consider government repayment capacity, inflation and any currency risk. Corporate analysis also requires an individual issuer’s cash flows, debt, other repayment dates and refinancing sources. A stock-exchange listing does not establish its ability to redeem bonds.

Corporate collateral can affect recovery if problems arise, but does not replace issuer analysis. Identify the collateral type, actual establishment, value, priority and enforcement process. A contractual promise to establish collateral is not evidence that it was effectively established.

Interest versus actual return

Retail Treasury bonds may use fixed interest, the NBP reference rate or inflation. COI and EDO have distinct first-year and later-year rules; COI pay interest annually, while EDO compound it annually and pay it at redemption. The purchased series’ issue letter defines the binding terms.

Corporate bonds can also have fixed or floating coupons. A benchmark-plus-margin formula makes future interest depend on later observations and issue terms. Secondary-market purchase prices may differ from nominal value; accrued interest and commission may be payable as well. Coupon percentage is therefore not yield on the full outlay.

Hypothetical example: a one-year bond with PLN 1,000 nominal value pays PLN 70 interest and redeems PLN 1,000. Bought for PLN 1,020, with no accrued interest, taxes or fees, its return is (1,070 / 1,020 − 1) × 100%, approximately 4.90%. The coupon is 7%, but purchase price changes the outcome. All payments are assumed timely; this is neither a current offer nor a risk valuation.

Exiting before maturity

For retail savings bonds, an early exit usually means requesting early redemption under that series’ terms. Check whether it is available, payment timing and the fee in the issue letter. The result can differ from holding to maturity, especially after tax and charges.

On Catalyst, an exit before maturity normally requires selling to another investor. There must be buy orders, and the obtainable price can be below your purchase price. An investor early-redemption right exists only where the applicable documents or law provide it; do not assume every issuer will repurchase on demand.

How to compare individual series

To compare two series, align currency and horizon, total purchase cost, interest dates, future-rate assumptions and exit route. Then account for tax and inflation and assess repayment risk separately. A higher coupon does not answer all these questions.

Bonds may also be held within IKE or IKZE where the selected institution and account type support them. Account tax rules do not alter issuer obligations. Our IKE/IKZE guide distinguishes retail Obligacje accounts from brokerage accounts. The obligacje.io catalog currently covers active corporate bonds on GPW RR and selected reviewed GPW ASO series; it does not cover the entire Treasury offer or all Catalyst instruments.