There hasn't been a 10-year bond yield this high since the collapse of Lehman Brothers in 2008, which set off the Great Financial Crisis. For five-year bonds, the yield is the highest since 2004. This is bad news for the government because it means the cost of servicing the debt is going up.

Bond yields are rising in almost all major markets and for several reasons, but one is the most important: the era of free money is definitely coming to an end. The biggest central banks are in the process of raising interest rates, some of them are also predicting recession, which always means trouble for the public finances (e.g. decrease in tax revenues).

In Poland, we have our own problems that overlap with this global trend. The government has been indulging itself too much in fiscal policy, increasing spending that it didn't have to increase (like the 14th pension) and facing new expenditures that it hadn't planned before. According to Mateusz Sutowicz, economist at Bank Millennium, the market is playing to the government's larger borrowing needs.

"The budget, however, is not made of rubber and there is a growing belief that borrowing needs will be high, much higher than at present. One may wonder, for instance, what additional expenditures will be included in next year's budget (parliamentary elections are scheduled for 2023). Moreover, new bond issues will be announced by Bank Gospodarstwa Krajowego, which from time to time performs the function of a quasi-ministry of finance. This all adds up to a picture of rising debt service costs," Mateusz Sutowicz said.

(300gospodarka)