2023-09-04 11:16:00
This is an absolute record, the issue of the one-year State note posting a net rate of 2.81%, which closed last Friday, will have made it possible to collect 21.896 billion with more than 400,000 subscribers. This operation is extraordinary. Let’s see why.
1. A winning transaction for savers?
The money invested in government bonds comes in (large) part from savings books. However, the State bond displays a net rate which corresponds to at least 1% more than the highest rates on savings accounts. With few exceptions, this yield is also higher than the rates on one-year term accounts offered by banks, which are considered a more comparable investment since the money cannot be withdrawn before maturity without losing all the yield.
But this state bond is not the best investment in absolute terms. An investor willing to take on a little more risk might have found higher returns for the same one-year term, especially in corporate bond markets.
The state bond is good, but there is better! Like a return of more than 3% net…
2. And what benefit for the Belgian State?
This issue will have shown that the Belgian State may display a debt far greater than its gross domestic product, it can borrow very easily from individuals. Enough to improve the rating of Belgium, which is positive. And this allows Belgium to borrow at a lower cost.
The amount collected being much higher than expected, it is too early to know if the amount that the State will have to pay in interest rates will be higher than if it had raised only a few billion. The possible additional cost will depend on many elements, in particular on the rate obtained for the investments of the excess billions (more than 10 billion). “We cannot yet say whether there is a cost or not linked to the very high number of billions collected. If there is one, it should be reasonable in relation to the profits of the operation”, explains a source close to the government.
It is at the level of the withholding tax that the State is at this stage almost certain to be a winner. Indeed, of the 21.896 billion collected, a large part comes from the 300 billion placed on deposit books which are exempt from withholding tax up to 980 euros in interest. However, the withholding tax on the State bond is 15%.
3. Will the banks review their conditions?
Remember that the primary purpose of this issue was to revive competition in the banking sector. At this stage, it is not yet acquired. During the term of the issue, only four banks (Argenta, Beobank, Deutsche Bank and Axa Banque) announced an increase in the rate on the term account to align it with that of the State note. But this increase, limited in time, was aimed solely at retaining their customers. The rest of the market did not move, at least on the savings account. And the statements made by Marc Raisière, the CEO of Belfius, on the occasion of the presentation of the bank’s results suggest that caution is in order.
The warning from Marc Raisière (Belfius) on State bonds: “Be careful not to create liquidity stress”
On term accounts, it is more difficult to measure the possible renewed competition because the big banks are far from being transparent about this product, the rates of which are negotiated with the client and according to the amounts invested. The publication of bank results over the first six months shows transfers from deposit books to term accounts. This shows that savers are less passive than before.
On the government side, we want to believe that this operation will have the desired effect. “Banks will be forced to move. This operation rekindled the link between the banks and their customers. We had not seen such proactivity for years”, comments a ministerial source.
Other observers are less confident, believing that CD&V Finance Minister Vincent Van Peteghem missed his target and tackled the lack of competition in the banking sector too late, particularly in savings products.
4. Will there be a new show before the end of the year?
We remember that the Debt Agency sent the message to the government “above all not to launch a second issue before the end of the year”. We can think that Vincent Van Peteghem will follow this advice, being himself a little taken aback by the size of the subscriptions. It should follow the advice of the Debt Agency even if the banks are reluctant to be more generous.
It must then be established that the goal pursued has not been achieved. Which would obviously be embarrassing a few months before the election campaign. Unless other avenues are mentioned. It is said that Vooruit (the Flemish socialist party) will come back with its proposal to impose a minimum rate on savings books. From there to think that a law could be passed before the elections, there is a step that we would not dare to cross…
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