The Belgian state issues five- and eight-year government bonds only in December. The press release was issued by the Federal Debt Agency, but the decision was at least partly settled through political games.
A Belgian saver who was hoping for a second chance with a one-year government bond will be disappointed. With the possible exception of the CD&V, no political party has given Finance Minister Vincent van Petegem an extra round as the patron saint of Belgian savers, with elections looming.
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1. Are five- or eight-year government bonds interesting?
no. When it comes to bonds, the world has turned upside down. Six-month or one-year bonds yield more than longer maturities. Moreover, a reduction in the withholding tax rate was only promised on one-year government bonds. If the government bond coupon were held constant today, government bonds would likely yield approximately 2 percent net over five and eight years. There are even savings accounts that work better:
Whoever buys Belgian government bonds on the secondary market, due in October 2024, will enjoy a total return of 3.52 percent, according to prices on the debt agency’s website. Savers pay a 30% withholding tax on the 0.5% coupon, but pay no tax on the difference between the current purchase price (97.31%) and the amount (100%) they get back at maturity. Anyone who wants one-year government bonds can try to buy one-year linear (OLO) government bonds in the secondary market through their broker.
2. Will there be government bonds in one year again?
Never say never, but we think the chances are rather slim. The tool was created in September to compete with savings accounts. However, the 15% withholding tax rate is only provided for two issuance periods: September and December. A repeat of the huge success of one-year government bonds in September could spell trouble for some Belgian banks.
On November 10, Belgian Competition Authority (BMA) And formulate advice to allow greater competition without jeopardizing the stability of the banking sector. the Eliminate the fidelity bonus Savings accounts are one of the proposed measures. Savers are entitled to this premium only after twelve months. It’s a different path Providing the possibility of transferring IBAN account numbers from one bank to another. If consumers can keep their account number, just as they can keep their mobile phone number when they switch providers, they may be more inclined to switch banks. Also Fundamental prohibition on the associated sale of products or servicesWhat connects consumers to the bank when obtaining a home loan, for example, can boost the movement of savers.
Not only is there no competition among banks, but it is also difficult for other savings and investment products to compete with a savings account. This is why the BMA stipulates this Extension of tax relief for, which now only applies to interest on a savings account up to a maximum of €980. If savers can funnel income from other products into that basket with tax advantages, they may also often look for alternatives.
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