Belgium's much-anticipated new five and eight-year government bonds will offer total yields of 2.60% and 2.90% respectively – significantly less than the 3.3% rate provided by special one-year bonds issued earlier this year.
Holders of the new financial assets, whose yields were announced by the Belgian Debt Agency on Tuesday morning, can expect to pay a withholding tax rate of 30% on their earnings.
This means that the effective yields – or the rate that bondholders can actually expect to earn – will be just 1.82% and 2.03% for the five and eight-year bonds respectively.
By contrast, purchasers of the so-called 'Van Peteghem bonds' (named after Finance Minister Vincent Van Peteghem) issued in September benefited from a reduction of the standard withholding tax rate from 30% to 15%. This meant that buyers earned an effective rate of 2.81%.
The lower rates for the new assets have led analysts to forecast that demand will be far below that displayed for the Van Peteghem bonds, which ended up raising nearly €22 billion for the Belgian State.
An attractive investment?
In a press release, consumer rights firm Test Achats noted that, although some Belgian banks' savings accounts currently offer higher rates than the new bonds, this is not guaranteed to remain the case over the next few years.
"The yield of the two new government bonds, which is lower than in September, seems less attractive at first glance," the group noted. "Nevertheless, these government bonds offer you the opportunity to fix your interest rate at the current level for several years."
Related News
- Belgian Government brands banking sector an 'oligopoly' due to lack of competition
- Undesired debt: Low demand forecast for new Belgian government bonds
It added: "Although there are currently savings accounts that yield more, we believe that this is a temporary situation and that interest rates will fall again in one or at most two years."
Test Achats also noted that Santander, MeDirect, and Keytrade Bank all currently offer yearly savings rates above that provided by the new bonds.
The bonds will be available for purchase from 30 November to 8 December. Those interested in buying them can find more information here.
