Brussels, Sept. 4 (BNA): Belgium has raised record 21.9 billion euros ($23.65 bln) from savers in a bond sale designed to compete with bank deposits, a sign of growing popularity for government debt as discontent grows with lenders failing to keep up with surging interest rates.
The sale, launched on Aug. 24, was aimed at pressuring banks to raise deposit rates. It marks the biggest funding drive from households in Belgium’s history and is likely Europe’s biggest retail bond sale, the country’s debt agency said on Monday.
Equivalent to around 5% of Belgian deposits, it eclipses the 5.7 billion euros raised from savers at the height of the eurozone debt crisis in 2011 and beats the 18 billion euros Italy raised from savers earlier this year, Reuters reported.
European lenders awash with cash have resisted raising savings rates while market interest rates have surged as central banks fight inflation, prompting withdrawals by households looking for better returns.
Bonds issued by governments targeted at savers have become a popular alternative. Italy and Portugal have this year shifted big slices of their funding programmes to households.
Belgium’s one-year bond pays an interest rate of 3.3%, above the 2.5% and often much lower rates on savings accounts, according to aggregator website Spaargids.
Jean Deboutte, a director at the debt agency, said high demand led to its IT systems crashing several times during the sale.
Across Europe, governments are seeking ways to compensate households taking a blow from the surging cost of living while missing out on the benefit of rising interest rates.
Italy recently dealt a blow to banks with a one-off tax on their excess profits.
While demand for the bond is high, the country’s biggest lenders are yet to raise rates paid on savings accounts.
Noting that some institutions have raised rates or offered similar products since the bond sale, Van Peteghem said he hoped and expected bigger banks would now follow.
The one-year maturity, shorter than Belgium’s usual retail bonds, was designed to mirror savings accounts that increase the payout to savers if they lock up their money for a year.
The government has agreed on a bill, pending approval, reducing the withholding tax buyers will pay to 15% to make the bond more attractive relative to savings accounts, from 30% on other Belgian retail bonds.
Belgium’s debt agency said the vast size of the bond sale meant outstanding short-term debt would be reduced by more than 10 billion euros over the course of 2023, longer-debt issuance cut by over 2 billion euros and the cash reserve position increased by around 9 bln euros.
($1 = 0.9260 euros)
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