The Federal Finance Minister Vincent Van Peteghem (Flemish Christian democrat) has announced that a new government bonds issue will be launched next month. However, unlike in September when investors had the opportunity to purchase bonds that will mature after just one year, the new bonds issue will offer bonds that tie up investors’ money for either 5 or 8 years.
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One-year bonds will not be offered during December government bonds issue
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Furthermore, a withholding tax of 30 percent will be levied on the interest accrued from cash invested in the bonds. A special reduced rate of withholding was levied on the interest that will be accrued on the one-year bonds issued in September. With December’s bonds issue the stand 30% rate will be levied.
September’s bonds release was a resounding success and more than 20 billion euro was invested in the bonds. In addition to raising funds that could be used as a loan to help pay for public services and make debt repayment on previous loans, the aim of the September bonds release was to put pressure on the banks to increase the rates of interest they offer savers. The one-year-bond offered a net interest rate of 2.25%.
This seems to have been at least partially successful with several of the country’s banks having announced interest rate increases for savings accounts. The High Street bank with the highest net interest rate ING currently offers a rate of 2.25%.