Camille Van Vyve
05 Sep 2024
What are the alternatives for the 2023 Belgian government bond?
Belgium successfully carried out a financing operation in September 2023, which enabled it to raise 22 billion euros through the issue of a 1-year state bond. As this bond just reached maturity, let's take stock of its performance and the alternatives available to the 630.000 investors looking for a new investment.
Reminder: what is a government bond?
Government bonds, also called state bonds, treasury bills or sovereign bonds, are debt securities issued by national governments to raise capital. Investors purchase these bonds to receive periodic interest payments, called coupons, as well as repayment of the principal amount at maturity. As the interest rate on a bond is fixed and governments are supposed to be reliable issuers, the government bond is generally considered a risk-free asset.
Belgian state bond 2023: characteristics and performance
The state bond issued by Belgium in September 2023 has a maturity of one year and expires on September 4, 2024. This means that on this date, savers who have subscribed to the state bond will receive their investment in return with a gross yield of 3,3%. Taking into account a withholding tax reduced to 15%, this corresponds to a net return of 2,81% over one year.
Belgian state bond 2023: advantages and disadvantages
The main advantage of the state bond is its guaranteed return, which makes it a risk-free product given its very short maturity and the solidity of the Belgian State. Unfortunately, the yield offered will not allow investors to cover inflation which was still at 3,2% between September 2023 and September 2024 in Belgium. In addition, the state bond is not a long-term investment solution and therefore requires the investor to find an alternative after one year.
Maturity of the state bond: an extraordinary financial event
On September 4, 2024, 630.000 investors will have to find a solution for their money. With nearly 22 billion to reinvest, this is the biggest liquidity event of this century in Belgium.
What to do with your money after the 2023 state bond?
State, banks, insurers... all financial players are rushing to capture this financial windfall. Among the solutions proposed, we mainly find new government bonds, term deposit accounts, savings accounts or even branch 21 products. All these investments share a common DNA: guaranteed capital for a net return slightly above 2% per year. As with the government bond, inflation will barely be covered. It therefore seems wise to explore other avenues.
ETFs: an attractive alternative
Thanks to ETFs, an investor can expect a return that will more than cover inflation by capturing the long-term performance of global stock markets. It will thus be able to constitute a diversified portfolio of global equities and adjust its risk profile by including a basket of government bonds from the euro zone. This type of investment involves an element of short-term uncertainty, but can prove very attractive in the long term with an average annual return of around 7%.
Easyvest: attractive returns since September 4
Easyvest offers 10 portfolios. The least risky includes 90% bonds and 10% stocks for conservative investors, and the most risky includes 100% stocks for aggressive investors with a long investment horizon. Since the launch of the Belgian government bond, all our portfolios have performed (significantly) above 2,81%.
| Portfolio | Net return |
|---|---|
| Easyvest 1 | 3,2% |
| Easyvest 2 | 4,5% |
| Easyvest 3 | 5,7% |
| Easyvest 4 | 7,0% |
| Easyvest 5 | 8,2% |
| Easyvest 6 | 9,3% |
| Easyvest 7 | 10,5% |
| Easyvest 8 | 11,7% |
| Easyvest 9 | 12,9% |
| Easyvest 10 | 13,8% |
These total net returns are calculated from 4/9/2023 to 15/5/2024 for the overall portfolio offered by Easyvest, after deduction of portfolio management fees, withholding tax and tax on stock market transactions (purchase and sale operations). As the period envisaged is very short, the above performances cannot be considered representative. Certain recent periods have been less favorable for this type of investment and have generated temporary losses. It is therefore necessary to consider investing in ETFs over a sufficiently long investment horizon.
Simulate the reinvestment of the state bond
Will you soon receive the capital invested in the Belgian government bond? Are you curious about your potential return your potential return with ETFs? Run a simulation now on our site and contact one of our wealth managers.