Geopolitics is driving up borrowing costs. Poland feels it acutely

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

How did the US attack on Iran affect perceptions of sovereign-bond yields? Two main forces are at work, but they pull in opposite directions. The first is a flight of capital to safe havens, which pushes yields down. On the other hand, expectations of higher inflation drive yields up. The longer the crisis drags on, the more the latter effect dominates. Unsurprisingly, it is stronger in countries that import energy.

Rising yields: absolute changes

The chart above shows changes in 10-year government-bond yields since the outbreak of the war in Iran (February 28th 2026), measured in percentage points for selected EU countries. Given the numerous escalations and de-escalations, I chose the end of April as the cut-off point for the analysis. The largest increases over that period were recorded in Romania (1.1 percentage points), Poland (0.8 percentage points), and Slovakia and Italy (0.6 percentage points each).

The average increase across the countries surveyed was 0.45 percentage points. That figure is somewhat distorted by Hungary, where elections took place during the period under review (on April 12th). This led to a marked decline in yields on Hungarian sovereign debt – particularly in relative terms, compared with other countries.

Not just the war

The Hungarian case highlights the limitations of such a simple comparison. During the period under review, several other events also affected sovereign-bond yields. One such factor was changes in central-bank interest rates. In Poland, for example, the Monetary Policy Council (RPP) eased monetary policy in March by 25 basis points. Other countries, meanwhile, left rates unchanged. In principle, a rate cut should lower bond yields – unless, of course, the move had already been fully priced in by the market. In Poland’s case, investors were divided over the likelihood of a cut. It is therefore reasonable to assume that, without the RPP’s decision, the rise in Polish bond yields would have been even steeper.

Another important development during that period was the publication of 2025 general-government results, along with official forecasts for this year. A deficit (or debt level) higher than markets had expected could have pushed yields higher, while a lower figure could have reduced them. Political tensions in Romania linked to fiscal consolidation – which ultimately resulted in a vote of no confidence against the prime minister – emerged only after the period covered by the analysis.

The chart should therefore be read as a simplified illustration of the impact and scale of the geopolitical shock on bond yields, without controlling for other factors. Even so, several patterns stand out. The sharpest increases in bond yields occurred in countries with large fiscal deficits, such as Romania, Poland and Slovakia. They were also pronounced in countries with relatively high public debt, including Greece and Italy – or in countries burdened by both, such as Finland.

Rising yields: relative changes

Czechia’s position near the top of the ranking reflects the relatively high level of yields in that country. More broadly, yields tend to be higher across most Central and Eastern European countries outside the euro zone. One reason is that interest rates are generally lower within the monetary union.

However, if we look at the relative change in bond yields (in percentage terms), rather than the absolute change (in percentage points), Czechia – with its low debt and deficit levels – drops to the bottom of the table. Poland remains above the average (14.7%, excluding Hungary), though the gap is less pronounced in this measure than in the opening chart. It is also worth noting that the increase in the United States was lower (10.9%). That reflects both the country’s safe-haven status and its domestic oil resources.

The conclusion is that Poland is relatively more exposed to increases in bond yields during periods of macroeconomic shock. That said, the scale of the current shock is incomparable to what occurred during the 2007-08 financial crisis or the euro-zone sovereign-debt crisis.

Debt-servicing costs in the EU and historical perspective

Relative to other countries, Poland generally spends more on servicing its public debt. In 2025 those costs amounted to 2.5% of GDP, while the government projects 2.7% of GDP for this year. In simple terms, that reflects the combination of relatively high bond yields and a moderate – though rising – debt burden.

From a historical perspective, Poland’s current debt-servicing costs remain around the mid-range. They were higher throughout the post-communist transition period and up until Poland’s accession to the EU. They rose again to 2.7% of GDP in 2012. At the same time, however, the gap between Poland’s debt-servicing costs and the EU average has widened in recent years.