In a first for the Belgian Debt Agency, Belgium's state bonds have raised a total of €21.896 billion, making it the Belgian government's largest capital operation among citizens.
Finance Minister Vincent Van Peteghem announced that the initiative was the most successful in Belgian history, far surpassing initial expectations. The subscription period ran from Thursday 24 August to Friday 1 September and the state bonds offered an interest rate of 3.30%.
"The success of the one-year State note shows that people are yearning for a higher and secure return on their savings. As such, the one-year State note aimed to boost competition within the banking sector," Van Peteghem said in a statement. The bonds have had the desired effect: the Argenta bank responded by temporarily offering a term account that yields the same net income as the bonds; several other banks followed suit.
Van Peteghem stressed this was a "powerful signal and a clear call for respect" for Belgian savers by the banking sector. "It is now up to the banking sector to heed this signal and regain the trust of their savers." He added that people can count on the government to follow this file closely in the coming period to "ensure competition within the banking sector."
Implications for federal financing plan
On Friday, a slightly higher final subscription amount was announced, as there was talk of more than €22 billion of subscriptions. However, the Federal Debt Agency had already warned of a possible correction, as the money had to be in the Agency's account on time.
Some 234,310 Belgians subscribed directly through the Agency's Ledger, accounting for €7.093 billion with an average subscription amount of €30,272, while more than 400,000 subscriptions were made via banks, accounting for €14.803 billion.
The higher-than-expected money raised will have implications for the Belgian government's 2023 financing plan: certain Treasury bonds that had been planned in the next few weeks will not go ahead; the Treasury certificate issues will either be cancelled or scaled back.
"In total, the Agency will reduce the issuance of Treasury bonds by €10.4 billion in 2023," the statement clarified. The remaining 2023 medium- and long-term debt issuances will also be reduced by €2.25 billion to €45 billion. The agency will also maintain a higher cash position, amounting to some €9 billion.
With more short-term (one-year) and fewer longer-term debt securities issued, the average duration of the debt portfolio will decrease slightly against its expected values for the foreseeable future.
Together with the Agency, Van Peteghem will consider which State note issues are opportune in the coming months. Another issue will normally follow in December, but details on maturity and so on are not yet known.
This latest announcement will be to the great relief of Belgian banks, which will feel some business competition from the popular state bonds. More than €20 billion of liquidity has been withdrawn from the sector, much thought to be investment in state bonds. Some economic experts raised the prospect that certain smaller commercial institutions could soon face an unprecedented liquidity crisis.
