Big sale of government bonds. The insurers are withdrawing their capital

The profitability of Polish Treasury debt securities has already dropped to 5.8 percent. in recent days, but there were days in June when it exceeded even 8%. The consequences were that the Ministry of Finance was selling bonds for a total of PLN 31 billion with an interest rate close to or above 7% from May to mid-July. annually. As it is easy to calculate, taxpayers will have to pay about PLN 2 billion in interest annually (7% from PLN 31 billion).

If such conditions applied to the entire Polish debt, PLN 102 billion would have to be drawn annually in interest (7% of the debt of PLN 1,453 billion of general government debt from mid-2022). It would be 19.5 percent. budget expenditure planned for the current year and 20.7 percent. budget revenues. For comparison – scheduled for this year. the cost of debt financing is “only” PLN 26 billion, a in next year’s budget this amount increased to PLN 66 billion.

Why do governments have to pay more and more on bonds? First, interest rates are rising and the market has assumed that they will continue to rise as long as inflation does not decline. We do have in Poland probable end of the increase cyclenow in the euro area, these have only just begun.

Secondly, there is a war in Ukraine and inflation, and this prompts people to draw savings with unsatisfactory interest rates, lower than inflation. Why keep the depreciating money, it is even better to buy something – such conclusions could be drawn by many.

Leave a Comment

Your email address will not be published.