You are currently viewing The State bond, a bad plan for your savings?  Here is the verdict of the experts

The State bond, a bad plan for your savings? Here is the verdict of the experts

  • Post category:Economy News
  • Reading time:3 mins read

The Federal Debt Agency is once again offering Belgian savers the opportunity to buy State bonds.

A new broadcast has been set for Sunday, September 4. And the subscription period started this Thursday.

The rates offered

The three new State bonds, at five, eight and ten years, will be matched for this issue with coupons of 1.05%, 1.40% and 1.70% respectively, the Debt Agency announced on Tuesday.

But beware, this is a gross annual rate. A withholding tax of 30% will be deducted directly from the sum repaid each year, which means that the net interest rate is respectively 0.73%, 0.98% and 1.19% for five-year government bonds, eight and ten years old.

“For individuals, it is true that these rates are not very attractive”concedes economist Bruno Colmant, professor at UCLouvain and ULB.“As inflation is high, this means that in addition to the 30% reduction in rates linked to the withholding tax, inflation must be subtracted, which will be much higher.”

However, some Belgians will be seduced.“There are individuals who are interested because they consider the state to be the safest borrower in Belgium”deciphers Bruno Colmant.“They are ready to give up part of their purchasing power to have this security that the State provides compared to a bank. ‘with a bank deposit, but that in a somewhat turbulent moment marked by the war in Ukraine, it is the state that has the best “signature”.

Back to the future

In the past, the Federal Debt Agency organized four issues a year: in March, June, September and December. But for several years, low interest rates forced it to suspend emissions.

That of last June was thus the first in three years and marked a real comeback.“In the current context, no bond-type investment is really attractive”analysis for his part Etienne de Callataÿ, economist for Orcadia asset management. “To earn a little more than with a savings account, you take a big risk. Because if you have to resell this State bond before its expiry on the secondary market and the rates have continued to rise, the value resale will have fallen sharply.”

40 million in June

A context and a specific risk which could however meet the expectations of a certain public.

The issue last June enabled the Debt Agency to raise nearly 40 million euros.

However, the rates of these State bonds were lower. They were then set at 0.7% for the five-year term and 1.3% for the ten-year term.

“40 million euros, that may seem high”concludes Étienne de Callataÿ“But in comparison with the total amount of Belgian savings, namely 300 billion euros, these are peanuts.”