Inflation-Linked Bonds (COI, EDO) -- Complete Guide

What Are Inflation-Linked Treasury Bonds?

Polish retail treasury bonds are debt instruments issued by the Polish government, sold directly to individual investors. Among them, two types stand out for inflation protection:

• COI — 4-year bonds indexed to inflation
• EDO — 10-year bonds indexed to inflation

Both automatically adjust their interest rate based on CPI, meaning your returns rise when inflation rises. This makes them one of the safest and most effective tools for protecting purchasing power in Poland.

How COI Bonds Work

COI bonds have a 4-year maturity. Here is how the interest is structured:

• Year 1: Fixed rate set at issuance (e.g., 6.55% for bonds issued in early 2026).
• Years 2-4: Variable rate equal to CPI inflation + a fixed margin (currently around 1.00-1.25%).

Example with Real Numbers

Suppose you invest 10,000 PLN in COI bonds issued in March 2026:

• Year 1: 6.55% fixed = 655 PLN gross interest. After 19% Belka tax = 530.55 PLN net.
• Year 2: If CPI is 4.5%, you earn 4.5% + 1.25% = 5.75% = 575 PLN gross. After tax = 465.75 PLN net.
• Year 3: If CPI drops to 3.5%, you earn 3.5% + 1.25% = 4.75% = 475 PLN gross. After tax = 384.75 PLN net.
• Year 4: If CPI is 4.0%, you earn 4.0% + 1.25% = 5.25% = 525 PLN gross. After tax = 425.25 PLN net.

Total after 4 years: ~11,806 PLN (after tax). Your money grew by ~18% over 4 years while being protected from inflation.

Interest is capitalized annually (added to principal) and paid out at maturity.

How EDO Bonds Work

EDO bonds have a 10-year maturity and work similarly:

• Year 1: Fixed rate (e.g., 6.80% for early 2026 issues).
• Years 2-10: CPI + margin (currently around 1.50-1.75%).

The higher margin compensates for the longer lock-up period. EDO bonds are ideal if you have a long time horizon — saving for retirement or a child's education, for example.

EDO vs COI: Quick Comparison

How to Buy Polish Treasury Bonds

Step 1: Open an Account

Register at obligacjeskarbowe.pl. You need a PESEL number and a Polish bank account. The process takes about 15 minutes online.

Step 2: Fund Your Account

Transfer money from your Polish bank (mBank, ING, PKO, Millennium, etc.) to your treasury bonds account.

Step 3: Select and Purchase

Choose COI or EDO from the current offering. Bonds are issued monthly with fresh rates. The minimum purchase is just 100 PLN (one bond).

Step 4: Wait and Earn

Interest accrues automatically. You can check your balance anytime on the portal. At maturity, principal plus interest is transferred to your bank account.

Early Redemption — What If You Need the Money?

Both COI and EDO allow early redemption, but with a penalty:

• COI: Penalty of 0.70 PLN per 100 PLN bond (0.70% of face value).
• EDO: Penalty of 2.00 PLN per 100 PLN bond (2.00% of face value).

You must submit a redemption request, and the money arrives within a few business days. The penalty is deducted from accumulated interest — you never lose your principal.

Tip: If you might need early access, prefer COI over EDO. The penalty is much lower.

Tax Treatment

Interest from treasury bonds is subject to 19% capital gains tax (Belka tax). The tax is automatically withheld at payout — you do not need to report it in your annual PIT declaration.

Other Treasury Bond Types Worth Knowing

While COI and EDO are the inflation stars, Poland offers other retail bonds:

• OTS (3-month): Fixed rate, currently around 3.0%. Good for very short-term parking.
• DOS (2-year): Fixed rate, around 3.25%. Predictable but no inflation protection.
• TOS (3-month): Similar to OTS, with slight structural differences.
• ROD (1-year, for 800+ recipients): Special bonds for families receiving 800+ child benefit, offering preferential rates of ~6.75%.

Who Should Buy COI and EDO?

These bonds are ideal for:

• Conservative investors who want guaranteed inflation-beating returns without stock market risk.
• Emergency fund overflow — money beyond your 3-6 month liquid reserve.
• Parents saving for children — EDO's 10-year horizon matches education savings timelines.
• FIRE seekers building a stable, low-risk foundation alongside equity investments.
• Anyone worried about inflation but unwilling to take equity risk.

Common Questions

Can foreigners buy Polish treasury bonds?

Yes, but you need a PESEL number and a Polish bank account. EU residents can usually obtain a PESEL through their local gmina (municipality).

Are they safe?

Treasury bonds are backed by the Polish government — the safest credit in the country. Poland has never defaulted on domestic debt.

Can I buy them through a broker?

No. Retail treasury bonds are only available through obligacjeskarbowe.pl, PKO BP branches, or by phone. They are not traded on the stock exchange.

How do I track them alongside my other investments?

This is where tools like Freenance become valuable. The app lets you add your treasury bonds alongside bank accounts, ETFs, crypto, and brokerage accounts, giving you a complete view of your net worth and how each component performs against inflation.

Strategy: Laddering COI Bonds

A popular approach is to buy COI bonds every quarter, creating a "ladder." After the initial 4-year wait, you have bonds maturing every 3 months, providing regular liquidity while maintaining full inflation protection.

Example ladder with 40,000 PLN:

• Q1 2026: Buy 10,000 PLN COI
• Q2 2026: Buy 10,000 PLN COI
• Q3 2026: Buy 10,000 PLN COI
• Q4 2026: Buy 10,000 PLN COI

Starting Q1 2030, each quarter a batch matures. Reinvest or use as needed.

Key Takeaways

• COI (4-year) and EDO (10-year) bonds automatically adjust to inflation, guaranteeing positive real returns.
• You can start with just 100 PLN at obligacjeskarbowe.pl.
• Early redemption is possible but comes with a small penalty.
• Consider laddering COI bonds for regular liquidity.
• Track your bonds alongside all other assets in Freenance for a complete financial picture.