Belgium issues new one-year bond with 2.8% interest

Belgium is set to issue new one-year bonds in its next round of federal fundraising, offering a 2.8% yield rate.

The bonds will be available for purchase from 24 August, and these will be the first Belgian state bonds with a one-year maturity – most state bonds mature in three, five, eight, or 10 years.

State bonds are a means for the Belgian state to borrow money from residents rather than through international markets.

Bonds are generally considered one of the safest investments a person can make, in part because those who purchase them know in advance when they can cash them in and exactly how much they will earn.

The only way a bond would not be repaid would be if the state were to go bankrupt.

The bonds Belgium is now offering are particularly advantageous from a tax point of view: they are taxed at half the normal rate with a withholding tax of 15% instead of 30%.

This means that for an advertised gross yield of 3.3%, the net yield - which a purchaser will receive after tax - is 2.81%. If someone were to purchase €1,000 worth of bonds, they will be able to cash them in for €1,028.10 a year later. The minimum amount to invest is €100, and there is no upper limit.

By way of comparison, the most attractive savings account on the Belgian market today (Santander Vision Max) offers a rate of 2.5%, but only for customers who deposit a minimum of €125,000 and a maximum of €200,000. ING's basic savings account offers a rate of 1.5%, compared with 0.9% at Belfius.

Those who wish to purchase state bonds can do so directly to the Federal Debt Agency or via one of 13 designated banks: ABN AMRO, Degroof Petercam, Belfius, Beobank, BNP Paribas Fortis, Bpost Bank, Crelan, Deutsche Bank, ING Belgium, KBC, Keytrade, Leleux and VDK Bank. Purchasing via a bank could result in additional charges.

A second round of bond issues in December could occur under the new legal framework in place, but “everything will depend on the market at that time” according to the federal finance minister’s office.