COI vs EDO vs TOS — Which Polish Treasury Bonds to Choose?

COI vs EDO vs TOS — Which Polish Treasury Bonds to Choose?

Polish treasury bonds are among the safest investment options in the country. But with three popular types — COI, EDO, and TOS — choosing the right one can be confusing. Each has different interest mechanics, maturity periods, and risk profiles. This guide breaks down all three so you can make an informed decision.

Quick Overview

TOS — 3-Year Floating Rate Bonds

• Period: 3 years
• Interest: Floating, based on WIBOR 6M
• Payout: Every 6 months
• Best for: Investors who want to benefit from rising interest rates

COI — 4-Year Inflation-Indexed Bonds

• Period: 4 years
• Interest: Fixed for year 1, then inflation (CPI) + margin
• Payout: Annually
• Best for: Medium-term inflation protection

EDO — 10-Year Inflation-Indexed Bonds

• Period: 10 years
• Interest: Fixed for year 1, then inflation (CPI) + margin
• Payout: Capitalized (compounded), paid at maturity
• Best for: Long-term investors who value compound interest

Side-by-Side Comparison

How Interest Works

TOS and WIBOR

TOS bonds are tied to WIBOR 6M — the interbank lending rate in Poland. When central bank rates rise, WIBOR rises, and so does your TOS interest. When rates fall, your returns decrease.

Advantage: Quick response to rate hikes. Disadvantage: Returns drop when rates are cut.

COI and Inflation

COI bonds have a fixed rate for year 1 (e.g., 5.75%). From year 2 onward, the rate is CPI inflation + a fixed margin (e.g., 1.00%). Interest is paid out annually.

Advantage: Direct inflation hedge. Disadvantage: If inflation drops to zero, you only earn the margin.

EDO and Compound Interest

EDO works similarly to COI, but interest is capitalized rather than paid out. This means each year's interest is added to your principal, and future interest is calculated on the larger amount.

Advantage: Compound interest effect boosts long-term returns. Disadvantage: You need patience — it's a 10-year commitment.

When Does Each Type Win?

Scenario 1: High Inflation (8-10%)

Winner: EDO. Compound interest magnifies returns during high inflation. COI also protects you, but annual payouts don't compound.

Scenario 2: Rising Rates, Falling Inflation

Winner: TOS. WIBOR responds to rate hikes faster than CPI adjusts. In periods of high rates but declining inflation, TOS outperforms.

Scenario 3: Stable, Moderate Inflation (2-4%)

Winner: COI or EDO (depending on your timeline). Both provide inflation + margin, ensuring positive real returns. EDO is better for longer horizons.

Scenario 4: You Need Liquidity

Winner: TOS. Shortest period (3 years) and lowest early redemption fee. If you might need the money, TOS is the safest bet.

Return Simulation

Assuming a 10,000 PLN investment with 4% annual inflation:

TOS (3 years, WIBOR 6M ~5.5%)

• Annual gross return: ~550 PLN
• After 3 years (gross): ~1,650 PLN
• After 19% tax: ~1,337 PLN

COI (4 years, inflation 4% + 1% margin)

• Year 1 (fixed 5.75%): 575 PLN gross
• Years 2-4 (5%/year): ~500 PLN/year gross
• After 4 years (gross): ~2,075 PLN
• After 19% tax: ~1,681 PLN

EDO (10 years, inflation 4% + 1.25% margin)

• Interest compounded over 10 years
• After 10 years (gross): ~6,700 PLN
• After 19% tax: ~5,427 PLN

Note: These are simplified calculations. Actual results depend on inflation and interest rate changes.

Building a Balanced Bond Portfolio

You don't have to choose just one type. A diversified approach works best:

• 30% TOS — liquidity and rate change protection
• 30% COI — medium-term inflation hedge
• 40% EDO — long-term growth through compounding

You can track this kind of bond ladder easily with Freenance, which monitors all your assets and calculates your "Financial Freedom Runway" — how long you could live without working based on your current financial position.

Early Redemption — What to Know

All three types allow early redemption, but with fees:

• TOS: 0.70 PLN per bond
• COI: 0.70 PLN per bond
• EDO: 2.00 PLN per bond

EDO has the highest fee because of its longer period. Redeeming EDO early — especially in the first few years — means losing significant compounding potential.

FAQ — Frequently Asked Questions

Which bonds are best for 2025?

It depends on your goals. With current inflation (~4%) and high interest rates, TOS offers attractive floating rates, while COI and EDO provide inflation protection for the future.

Can I hold COI, EDO, and TOS at the same time?

Yes, there are no restrictions. You can buy different types every month.

Can inflation-indexed bonds give negative interest?

No. If inflation turns negative, the interest rate for that period is 0% (never below).

What's the main difference between COI and EDO?

The period (4 vs 10 years) and interest payout method. COI pays annually; EDO capitalizes interest. EDO benefits from compound growth.

Should I buy TOS if rates are expected to drop?

Not necessarily. If you expect rate cuts, COI or EDO may be better — their returns depend on inflation, not WIBOR.

Where can I check current rates?

Current rates are available at obligacjeskarbowe.pl in the "Offer" section.

Summary

There's no single "best" bond — it all depends on your investment horizon, inflation expectations, and liquidity needs. TOS offers flexibility, COI protects against inflation, and EDO maximizes returns through compounding. The smartest approach is to combine all three in a balanced portfolio.