Corporate bonds — how they differ from government bonds

Quick Answer

Corporate bonds are debt securities issued by companies: by buying one you lend money to a company in exchange for regular interest (a coupon) and repayment of the face value at maturity. Unlike government bonds, where the State Treasury is the debtor, here a private company is the debtor — meaning higher risk (including default, as in the 2018 GetBack collapse) but a higher coupon as a risk premium. In Poland they trade mainly on the Catalyst market (WSE) or via private placements, and interest is taxed at 19%. This is educational information, not investment advice.

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What are corporate bonds?

Corporate bonds are debt securities issued by companies. By buying a corporate bond, you lend money to a company in exchange for regular interest (coupon) and capital repayment at maturity.

Unlike government bonds, where the state is the debtor, here a private company is the debtor — which means higher risk, but also higher potential profit.

Corporate vs government bonds

How do they work?

1. Company issues bonds (e.g., 1,000 PLN face value, 8% coupon, 2 years)
2. Investor buys bond for 1,000 PLN
3. Every half year/year receives interest (coupon)
4. After 2 years, company returns 1,000 PLN face value

Where to buy?

Catalyst Market

Organized bond market operated by WSE. You need a brokerage account. You trade bonds like stocks.

Private issues

Some companies offer bonds directly (e.g., through brokerage houses). Often higher coupons, but also higher minimum amounts.

Risks

Credit risk (default)

Company may not repay bonds. Examples from Polish market: GetBack (2018) — investors lost billions of PLN. This is the most important risk.

Liquidity risk

Many bonds on Catalyst have low turnover — you may have trouble selling before maturity.

Interest rate risk

Fixed-coupon bonds lose value when interest rates rise.

How to assess risk?

• Check the issuer's rating (if it exists)
• Analyze financial statements — debt, cash flows, profits
• Avoid companies offering significantly higher coupons than the market (10%+ with 5% rates is a red flag)
• Diversify — don't buy bonds of one issuer for more than 5-10% of portfolio

For whom?

Corporate bonds can be part of a portfolio for an investor who:

• Seeks higher interest rates than deposits and government bonds
• Understands credit risk and can assess it
• Has a diversified portfolio and doesn't put everything on one card

How can Freenance help

In Freenance, you add corporate bonds to your portfolio and see them alongside stocks, ETFs, and government bonds. Track coupons, maturity dates, and real allocation — full risk picture in one view.

👉 Manage bonds in Freenance — freenance.io

FAQ

What are corporate bonds in Poland?

Corporate bonds are debt securities issued by companies that pay a coupon and return the face value at maturity. In Poland they are most commonly listed on the Catalyst market operated by the Warsaw Stock Exchange, although they are also offered through private placements arranged by brokerage houses.

How is credit risk on corporate bonds different from treasury bonds?

Treasury bonds carry the credit of the State Treasury, which is considered very low risk in domestic currency. Corporate bonds rely on the financial health of a private issuer, so the coupon includes a risk premium that compensates for the chance of default, late payments, or restructuring.

What did the GetBack case teach Polish investors?

The 2018 GetBack collapse showed that even widely distributed corporate bonds can default and lead to multi-billion zloty losses for retail holders. The lesson is to look beyond the coupon, scrutinize the issuer's leverage and cash flow, and avoid concentrating savings in a single name or sector.

Are coupons of 10%+ a red flag in the current environment?

When risk-free rates are around 5%, double-digit coupons typically indicate that the market is pricing in elevated default risk for that issuer. They are not automatically a scam, but they require deeper credit analysis and usually fit only a small, diversified portion of a portfolio.

Are corporate bonds suitable for beginners?

They can be part of a portfolio for investors who understand credit risk, can read financial statements, and accept that capital is not guaranteed. Beginners who want bond exposure with lower complexity often start with Polish retail treasury bonds (OTS, COI, EDO) before moving into Catalyst names.