Belgium will again issue state bonds – one with a one-year term and one with a three-year term – on 4 March, but it will limit the amount raised to €6 billion and may close the subscription early, the Debt Agency announced in a press release on Tuesday afternoon.
This marks the first reissue of the one-year state bond since its inaugural issue on 4 September 2023 – which was branded a "success" after raising a total of €21.896 billion.
The withholding tax rate for the three-year state bond will be the usual 30%. The government agency had proposed reissuing, like last year, the one-year bonds at the same reduced withholding tax rate of 15% to Finance Minister Vincent Van Peteghem (CD&V).
Whether that will be the case is not yet certain; a decision on the applicable rate is expected by Monday 19 February. Van Peteghem has been advocating that advantageous rate for some time following last year's success.
'Not appropriate' for the budget
Just several hours after the Debt Agency's press release, however, State Secretary for the Budget Alexia Bertrand (Open VLD) gave a negative opinion for the issuance of the new one-year bonds at 15% again. "It is not appropriate from a budgetary point of view," she said.
Bertrand, who was to give her final approval of that reduced rate by 19 February, has no intention of doing so, her spokesperson told Belga News Agency. The Federal Government's interest burden will rise from €10.3 billion to about €14 billion by 2028, and it is currently much cheaper for the State to borrow for ten years than for one year.
"It is therefore not appropriate from a budgetary perspective to additionally support the more expensive one-year interest rates with a reduced withholding tax of 15%," she said, adding that the one-year state bond can be issued, but at the normal rate of 30%.
Credit: Belga
In theory, the State Secretary's advice can be overruled by the Council of Ministers, but that seems unlikely given Bertrand herself is part of the Council and can count on the support of Open VLD colleagues, at the very least.
Meanwhile, the interest rates (or coupons) of both state bonds are not yet known, but the Debt Agency said they would announce them on Tuesday 20 February. Subscribing to the state bonds will then be possible from Thursday 22 February until Friday 1 March, unless the maximum amount of €6 billion would have been raised earlier.
In recent weeks, the banks announced they would "respond appropriately" to another tax-friendly state bond. Van Peteghem's aim was to offer an alternative to the traditional savings account, which would lead banks to increase their savings rates.
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It is not exceptional that new state bonds are being issued now, as the Debt Agency always releases them in March, June, September and December. It can choose from different maturities to do so.
However, as low interest rates meant that the bonds were not an interesting alternative to savings or other investments for a long time, they came under less attention until Van Peteghem announced the particularly tax-friendly ones last summer.
