Warning signs before deciding on a corporate bond

The first warning sign is yield clearly above similar series without a clear reason. Bond markets often pay more for credit risk, weak liquidity, a short path to a large redemption or uncertainty around refinancing.

The second sign is deteriorating issuer reporting: rising debt, weakening interest coverage, negative operating cash flow, delayed reports or frequent changes to financing terms. One event does not decide the outcome, but the trend matters.

The third sign is issue documentation that gives limited bondholder protection: no collateral, unclear covenant definitions, broad carve-outs from debt restrictions or breach procedures that require difficult coordination among many investors.

The fourth sign is liquidity. If the last trade is old, spread is wide and order-book depth is low, price can look more precise than it is. Under market stress, exit conditions may be much worse than the last price suggests.

The Polish supervisor publishes a public warning list and explains that absence from the list does not confirm credibility. It is a useful negative filter, but not a substitute for issuer, document and instrument analysis.