State bond interest rates confirmed

Belgium’s latest state bond issue will pay a 2.75% interest rate for the one-year note and 2.8% for the 10-year note, authorities have confirmed.

With normal withholding taxes of 30% for each, the net interest rates are 1.925% and 1.96%, respectively.

The two bonds will be issued on 16 September, with the subscription period open from now until Friday 13 September.

As expected, the gross interest rate applied to new notes is lower than the 3.3% attached to the September 2023 state note. Terms for last year’s note also featured a reduced withholding tax of 15%.

The main reason for this is that the outgoing federal government cannot take decisions that would commit the state budget.

People will be able to purchase the new bonds at banks or directly with the Debt Agency, via the Grands-Livres department, with the agency having to receive the funds by 13 September at the latest.

Last year’s bond was very successful, with 542,670 Belgian residents giving nearly €22 billion to the state through the purchase of notes. These bond-holders will get their money back – plus interest – from this week.

But bonds are not just for replenishing state coffers. The Brussels commune of Etterbeek has itself launched a "communal voucher" to finance the construction of a creche.

Under new European legislation, the local authority is able to make a public appeal for funds to its residents, but also to non-residents.

Such public offerings are highly regulated. The operator chosen by the municipality had to obtain the green light from financial services and markets watchdog FSMA, and the regional supervisory authority also had to be brought on board.

A guarantee that the loan - limited to €1.2 million out of the total budget of €4.6 million - would be repaid at the end of the 18-month construction period was required.

Since Brussels municipalities cannot submit budgets with deficits, and Etterbeek has reserves and the fiscal power of any local authority, the risk of non-repayment is considered low, even if there is no such thing as a totally risk-free investment.

Subscriptions for the Etterbeek bonds launched on Wednesday and will close once the target of €1.2 million has been reached.

The terms include a gross interest rate of 4.5% for Etterbeek residents (or 3.15% net) and 4% for non-Etterbeek residents (or 2.8% net). Interest will be paid in three instalments, every six months.

The future creche will be a passive or low-energy building, with a heat pump, rainwater recovery and a green roof, and will offer places for disadvantaged families.

It is also part of the local authority's carbon plan, which aims to reduce greenhouse gas emissions by 40%.