Belgium's freshly introduced one-year government bond has stormed the financial market, gathering nearly 1 billion euros in investments on its inaugural day.
The bond, offering an attractive interest rate of 2.81 percent, was officially launched by the federal Debt Agency on Thursday.
Jean Deboutte, the director of the Debt Agency, revealed that the first subscriptions were received merely a minute after midnight. It's worth noting that the stated figure includes direct investments made through the agency, while those routed via banks might involve additional charges. The subscription period remains open until September 1st, and the one-year term commences on September 4th.
As of 8:00 AM on Thursday, a total of 1,582 subscriptions had amassed, representing 66.4 million euros. By 2:45 PM, the subscriptions surged to 23,553, translating to an impressive 827 million euros. Deboutte has even hinted at the possibility of raising up to 20 billion euros, suggesting that this venture could potentially become the largest financial operation in the nation's history.
By issuing the bond with a favorable interest rate, the government aspires to incentivize banks to increase interest rates on their savings accounts.
'Banks Poised to Handle the Situation'
Hans Degryse, a financial economics professor at KU Leuven, affirmed that banks are well-prepared to manage the situation if clients decide to transfer their funds. "While this could entail a substantial withdrawal of savings deposits simultaneously, banks maintain significant liquidity and can sell government bonds as needed," he conveyed to Belga. "Banks always have the option to adjust their own interest rates."
Entities like Argenta, Axa, Beobank, and Deutsche Bank are presenting one-year term accounts with comparable returns, albeit limited to the subscription duration of the government bond.
Contrary to speculation, Finance Minister Vincent Van Peteghem refuted the existence of any agreement between the Debt Agency and banks that would prohibit the latter from raising interest rates during the bond's tenure. "There is no arrangement with the Debt Agency that would hinder banks from raising their rates," Van Peteghem emphasized on Wednesday. "The only ones preventing that possibility are the banks themselves. Any potential mutual agreement among them to avoid increasing interest rates would be a violation of the law. Period. My foremost concern is the well-being of savers, which aligns with our intention behind introducing the government bond." Photo by European People's Party, Wikimedia commons.