Belgium’s new 1-year government bond has a net yield of 1.93 per cent, according to the announcement by the Federal Debt Agency. The 10-year government bond yields 2.59 per cent.
The gross interest rate on the 1-year government bond is 2.75 per cent, and 3.70 per cent on the 10-year bond. After deduction of the 30 per cent withholding tax, the net yields are 1.93 per cent and 2.59 per cent respectively.
What is a government bond?
A government bond is a bond issued by the Belgian government targeted at the public at large. A government bond means you are lending a sum of money to the government for a predetermined period. You receive interest on the amount each year. At the end of the term, you get your money back.
The 1-year government bond is currently offering a higher return than in recent years. For example, in the most recent issue, in June, the net yield was 1.75 per cent.
What does that return mean in euros?
How much that 1.93 per cent actually yields depends on your investment. If you decide to buy 5,000 euros’ worth of government bonds, you will receive 5,096.5 euros back from the Belgian government next year. That is your 5,000-euro investment plus 96.5 euros in interest.