Belgium's successful issuance of special one-year government bonds could save taxpayers up to €152 million over the next ten years, the Belgian Debt Agency has announced.
In a statement published on Monday, the Debt Agency praised the recent sale of €21.896 billion of so-called Van Peteghem bonds (named after Finance Minister Vincent Van Peteghem) as "by far the most successful issuance of state [bonds] ever". It noted that they "will lead to lower debt servicing costs for future issuances".
The Agency stated that high demand for the bonds has caused the "spread" (or difference) between Belgian government bonds and those of neighbouring countries (e.g. Germany and France) to decline by 3 to 4 basis points (i.e. 0.03 to 0.04 percentage points). This implies that Belgium will pay less interest on future debt issuances.
The cost savings for bonds issued in 2023 are estimated to be €2.1 million per year, or €21 million over the next 10 years, the Agency noted. "In case this decrease in spread would be confirmed in 2024, another €15.2 million per year would be saved, or €152 million over the next 10 years."
Beating the budget blues?
The Debt Agency also expects the sale of bonds to bolster national finances in other ways. In particular, it forecast that taxes levied on the bonds will boost Federal Government revenue by €60 to €100 million in 2024.
Furthermore, it reported that higher-than-expected purchases made directly through the Debt Agency website (rather than via commercial banks) means that the Federal Government will pay less than predicted on bank commission fees.
"As there are no fees paid for subscriptions via the Agency's website, the cost savings amount to €21.3 million."
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In a separate press release published on Monday, the Agency reported that the surprising success of the one-year bonds will mean that additional debt issuances will be scaled back this year. In particular, plans to sell €47.25 billion of debt will be lowered to €45 billion.
News of the bonds' success has been warmly welcomed by the Federal Government, which has long been mired in discussions over how to service its burgeoning deficit.
According to the most recent European Commission figures, Belgium's debt to annual GDP ratio is 107.4% – well above the EU's mandated limit of 60%. Its deficit is also set to expand from -3.9% of annual GDP in 2022 to 5.0% this year: well above the EU's 3% threshold.
