Belgium recently paid its highest interest rate on ten-year debt in more than a decade, adding pressure on public finances as the cost of borrowing rises.
The Federal Debt Agency raised €3 billion on Monday by selling five, eight and ten year government bonds. The ten-year bonds, worth €1.11 billion, were issued at an average yield of 4.299%, the highest since January 2012 when Belgium paid 4.302%.
The government also raised €1.03 billion through five-year bonds at 3.806% and €870 million through eight-year bonds at 4.117%.
These higher rates reflect the sharp rise in borrowing costs in financial markets over the past several weeks. Renewed pressure on energy prices, largely due to conflicts in the Middle East, has raised concerns about inflation and the possibility that interest rates could stay higher for longer.
Rising government debt is also adding to this pressure. European countries have been increasing their defense budgets amid recent geopolitical tensions, while also facing the long-term costs of their ageing populations and the negative effects of climate change.
For Belgium, higher rates mean refinancing maturing debt will become increasingly expensive. The Debt Agency has two more bond auctions scheduled this year, on 26 October and 23 November respectively. If borrowing costs remain elevated, they could add further pressure to the government’s interest bill, which could make Belgium's debt even worse.
