Bonds and state notes
- Safer than investing in shares
- Periodic coupon interest
- Typically higher returns than savings accounts
What is a bond? And what is a state note?
When you buy a bond, you are actually lending money to a company or a country. In return, you will receive annual interest. After a certain period, the bond expires and you will normally get your lent money back.
If the bond is issued by a company, it is called a corporate bond. If it is issued by a country, it is called a government bond, also known in Belgium as ‘state notes’. There are also savings certificates, in Belgium, where you effectively lend money to a bank.
Please note: a bond is still an investment and is therefore not entirely without risk. Companies and countries could go bankrupt or lack sufficient capital to pay the coupon interest or to repay the bond at maturity.
What returns do bonds offer?
Bonds are an interesting investment if you are looking for a higher return without taking a lot of risk. They typically offer a better return than a traditional savings account, whilst offering greater security than shares.
For instance, most bonds offer a fixed interest rate in the form of periodic coupon interest. So you know from the start precisely what income you can expect to receive each quarter or each year. Though there are also some bonds which have variable interest rates.
Read more about the pros and cons of investing in bonds.
How much does investing in bonds cost?
The issue price of a bond varies from bond to bond, as it is determined by the company or country that issues the bond. When a bond is resold at a later date, the selling price is referred to as the secondary price. The secondary price depends in part on the what is happening to market interest rates.
As well the issue price, you pay commission, and you will also pay withholding tax on the interest you receive.
A final point worth bearing in mind is that you will need a custody account in order to invest in bonds. KBC can provide a custody account for free.
How to invest in bonds
You can invest in a range of different bonds through KBC. The first thing to do is to make an appointment at your nearest branch or take a look at the current available bond issues.
Legal information about the KBC Time Deposit Account
- The minimum subscription amount for KBC Time Deposit Accounts in euros with a term of 1 to 11 months is 10 000 euros. The interest is paid at maturity.
- The minimum subscription amount for KBC Time Deposit Accounts in euros with a term of 1 to 8 years is 500 euros. The interest is paid annually.
- The minimum subscription amount for KBC Time Deposit Accounts in foreign currencies ( AUD, CAD, CHF, CZK, DKK, GBP, HUF, NOK, NZD, PLN, SEK, TRY, USD and ZAR) with a term of 1 to 11 months depends on the currency. The interest is paid at maturity.
- The minimum subscription amount for KBC Time Deposit Accounts in foreign currencies (USD) with a term of 1 to 3 years is 500 US dollars. The interest is paid annually.
- The rates are constantly changing. The rate is guaranteed at the time of subscription for the entire term. For current rates, contact your KBC Team or ask for the information you require via the contact page.
- There are no entry or exit charges if you keep the time investment until maturity.
- A time deposit account is relatively safe: the capital is repaid by the issuing bank at the predetermined maturity date. If the bank goes bankrupt or is unable to repay your capital, the capital of your term investment will still be covered by the deposit guarantee scheme for an amount of up to 100.000 euros per person and per bank.
- The income generated is subject to Belgian withholding tax of (currently) 30% on the gross amount of the interest. Some investors may qualify for an exemption if they meet certain criteria. The tax treatment information applies to individual investors subject to Belgian personal income tax. The tax treatment will depend on your individual circumstances and may change in the future.
- Belgian law applies to these products.
- No key information for savers document is available for these time deposit accounts.
- The time deposit accounts depicted here are products of KBC NV, Havenlaan 2, 1080 Brussels, Belgium. VAT BE 0462.920.226, RLP Brussels, FSMA 026256. A Member of the KBC group.
- If you have a complaint, please contact KBC Complaints Management, Brusselsesteenweg 100, 3000 Leuven, complaints@kbc.be, tel. 016 43 25 94 and/or ombudsman in financial conflicts: ombudsman@ombudsfin.be.
- In case of the financial institution's bankruptcy or risk of bankruptcy, the saver runs the risk of losing their savings or may be subject to a reduction/conversion into shares (bail-in) of the amount of the claim they have against the financial institution for the sum above 100 000 euros that is covered under the deposit guarantee.
- You can subscribe to a time deposit account at your bank at any time. If you want to sell your time deposit accounts before maturity, your bank may buy them back (please note that it is not obliged to do so). The value you then get, depends on the market's interest rates and the costs charged by the bank. So it is by no means certain that you will recover your initial capital.
