To invest in State bonds or not to invest, that is the question… With gross interest rates of 0.70% (0.49% net) or 1.30% (0.91 net), should one commit his money for 5 or 10 years? “You have to look at the competition, savings accounts, term accounts with banks, these are not high rates either”reacts Jean Deboutte, of the Federal Debt Agency. “I think we are competitive at the moment,” he adds.
It is true that with an interest rate at the legal floor of 0.11%, loyalty bonus included, the vast majority of interest booklets offer less to the individual investor than the new State bonds.
For some observers, even at 1.30%, the interest rate on government bonds remains low. “This is still extremely low in view of inflation which, for the moment, is around 8% in national definition and 9% in European definition”, explains Eric Dor, Director of Economic Studies at the School of Management of the University of Lille. “This means that, even an interest of 0.7% that the State would offer, it remains a real interest of -8% approximately”, he adds. “The saver who will buy such a voucher will, as with savings books, continue to lose a lot of purchasing power”continues Eric Dor.
So will individual savers and investors leave the money in the savings books or direct part of their money to government bonds? The two products have different practicalities. An interest booklet will allow its holder to withdraw their money at any time. The money placed in a State bond can only be recovered at maturity, 5 years or 10 years, in this case. It is always possible to resell a State bond along the way, but you will lose part of your starting capital. It is the market that sets the value of a “second-hand” government bond. In addition, on resale before maturity, a tax of 0.12% on stock market transactions might be due.
The future evolution of interest rates is also to be taken into account. There is no crystal ball to predict the future of interest rates on savings and investment products. Recent statements by the head of the European Central Bank, Christine Lagarde, point to a rise in rates, evoking an end to negative rates by the end of the third quarter. Will this provide more attractive investment opportunities than current government bonds? The question remains open.
