📅 Last updated: 8 May 2026
· 🏷 Topic: Bonds, OLO, government bonds, bond ETFs, yield curve, Reynders tax
· 🇧🇪 For: Belgian private investors with a defensive portfolio allocation
What will you learn?
- What a bond is and how coupon, principal, and maturity relate to each other
- The difference between government bonds (OLO) and corporate bonds
- How rating agencies (S&P, Moody’s, Fitch) evaluate companies and countries
- When individual bonds versus bond ETFs make sense
- How interest rate movements affect bond prices
- The tax specifics in Belgium (withholding tax, Reynders tax)
1. What is a bond?
A bond is a debt instrument. An issuer (government or company) borrows money from investors and promises:
- Periodic interest (the “coupon”), e.g. 3% annually.
- Repayment of the principal (“face value”, typically €1,000 or €100) at maturity.
Example: you buy a Belgian OLO with a coupon of 2.5%, face value €1,000, maturity 10 years. You receive €25 per year in interest over 10 years, plus €1,000 back at the end.
Three key characteristics:
- Coupon rate — fixed interest as a % of face value.
- Maturity — short (1–5 years), medium (5–10 years), long (10+ years).
- Credit quality — probability that the issuer defaults (cannot repay).
2. Belgian government bonds (OLO)
For private investors, the best-known Belgian bond is the OLO (Obligation Linéaire / Lineaire Obligatie), issued by the Belgian Treasury.
How to buy:
- On the secondary market via your broker (Bolero, Keytrade, etc.).
- At issuance of a government savings bond (staatsbon) — a specific product for private investors with attractive terms, offered periodically by the FPS Finance — Treasury (the September 2023 savings bond delivered 2.81% net over 1 year — an exceptional case).
Characteristics:
- Low default risk — the Belgian state holds an AA- rating (S&P, 2026).
- Liquid secondary market — selling before maturity is possible but at market price.
- Coupon taxable at 30% withholding tax (précompte mobilier).
3. Corporate bonds and ratings
Companies can also issue bonds to raise capital. Their creditworthiness is assessed by rating agencies (Standard & Poor’s, Moody’s, Fitch):
| Rating category | S&P notation | Description |
|---|---|---|
| Investment grade | AAA, AA, A, BBB | Low default risk, “safe” |
| Speculative grade (“high yield” / “junk”) | BB, B, CCC, CC, C | Higher default risk, higher coupon |
| Default | D | In default |
Rule of thumb: the higher the rating, the lower the coupon (the market demands less compensation for lower risk).
Investment grade corporate bonds (Coca-Cola, Microsoft, AB InBev) are a reasonably safe addition. High yield (so-called “junk bonds”) offers higher return potential but correlates more strongly with equity markets during stress periods — less defensive than the term “bond” might suggest.
4. Bond ETFs vs. individual bonds
| Individual bond | Bond ETF | |
|---|---|---|
| Diversification | Low (one issuer) | High (hundreds) |
| Maturity date | Yes, with guaranteed principal | None — ETF rolls over |
| Interim price fluctuation | Yes, but irrelevant when holding to maturity | Yes, ongoing |
| Minimum investment | Often min. €1,000 face value | From €1 |
| Liquidity | Variable | High |
| Costs | Stock exchange tax (TOB) on purchase | TOB + annual TER |
| Reynders tax | No (individual bond) | Yes, on the capitalising portion |
Which situation calls for what?
- Specific financial goal with a fixed date (e.g. child’s university in 5 years): individual bond with matching maturity — you know the return in advance.
- General defensive allocation in a long-term portfolio: bond ETF — simple and broadly diversified.
- Large portfolio + desire for a specific credit risk profile: combination of individual bonds.
5. Interest rate risk and the yield curve
Key rule: when market interest rates rise, existing bond prices fall — and vice versa. The mechanics:
- A 10-year bond with a 2% coupon becomes worth less when new 10-year bonds offer 4%. Nobody wants to buy the old one at par.
- The longer the maturity, the greater the price sensitivity to interest rate changes (“duration”).
This explains the dramatic declines in long-bond ETFs in 2022–2023 when rates rose sharply after a prolonged low-rate period. Those holding individual bonds to maturity did not feel this — those holding a bond ETF (no maturity date) did.
The yield curve:
A plot of interest rate versus maturity. Normally: upward-sloping (longer = higher rate). An inverted curve (short > long) is often seen as a signal of an approaching recession — though it is not a perfect predictor.
6. Tax impact (withholding tax and Reynders tax)
On individual bonds:
- Coupon taxable at 30% withholding tax (précompte mobilier). This is automatically deducted by a Belgian broker as standard; when holding to maturity, only this withholding tax applies to coupons.
- TOB of 0.12% applies on both purchase and sale on the secondary market (not at primary issuance such as a new government savings bond). Exception: Belgian OLOs (linear bonds) and comparable EEA government bonds are exempt from TOB (art. 126 of the Code of Miscellaneous Duties and Taxes); government savings bonds are also exempt at primary subscription.
- From 1 January 2026: capital gains on sale before the end date fall under the new 10% capital gains tax above the annual exemption of €10,000.
- Principal: repaid at maturity subject to the issuer not defaulting (default risk).
On bond ETFs and bond funds:
- TOB: 0.12% (distributing, or capitalising registered outside Belgium) or 1.32% (capitalising, registered in Belgium).
- Reynders tax: 30% on the TIS (Taxable Income per Share — interest + debt-related capital gains) — applies on sale for both distributing and capitalising funds.
- Two thresholds: for funds purchased from 1 January 2018, the Reynders tax applies as soon as the fund invests ≥10% in debt instruments; for funds purchased before 1 January 2018, the older threshold of 25% applies.
- From 2026: split treatment for bond ETFs (distributing and capitalising) — TIS component → 30% Reynders tax, the residual capital gain above the annual €10,000 exemption → 10% new capital gains tax.
- Securities tax (annual tax on securities accounts): if you invest via a securities account whose average value exceeds €1,000,000, you pay an annual securities tax of 0.30% (law of 18 December 2025, Belgian Official Gazette 30 December 2025 — doubled from 0.15%). This applies to your entire securities account, including bonds and cash bonds.
💡 For the complete tax treatment: see the Belgian investment taxes pillar article(NL).
Sources & further reading
- Federal Treasury — OLOs and government savings bonds
- Wikifin — Understanding bonds
- FPS Finance — Withholding tax on interest
- ECB — The importance of interest rate decisions
- Curvo — Reynders tax
Read also: how to buy Belgian state bonds (staatsbons) directly
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Building an emergency fund: how much and where?
How to build a 3-6 month emergency fund in Belgium: regulated savings €1,020 exemption, OLO bonds, and what to avoid.
