(Bloomberg) -- Belgium drew less than €500 million ($542 million) of orders for a bond sold to retail investors, a fraction of a similar transaction last year as demand for the securities crumbles.

The one-year bond drew €413.3 million of orders while those for a three-year note were just €19.7 million, according to a statement from the country’s federal debt agency. Demand for Belgium’s last retail offering in September 2023 totaled a record €21.9 billion.

Households last year rushed to get their hands on the securities, which paid more interest than bank savings accounts. The government said the sale was designed to pressure lenders into raising interest rates, which at the time, were not keeping up with the rising cost of borrowing as the European Central Bank tightened monetary policy.

Deposits of up to one year earn an average of 3.43% at Belgium banks, compared to 2.01% at the start of last year, according to European Central Bank data. The coupon on the one-year bond priced Monday was 3%.

Despite the plunge in demand, Belgium will continue to issue retail-targeted bonds given it offers a way to diversify the government’s funding, according to the head of the country’s debt agency Jean Deboutte. He said the nation plans to offer additional retail bonds in June, September and December this year. 

“It’s a possibility for people to invest directly in government debt,” he said in a phone interview. “It’s a brand that is firmly established. It’s of strategic importance for the Belgian state to have this product. I think that is worth something, but maybe it’s not always going to raise billions of euros.”

Belgium Sells Record €22 Billion Retail Bond to Investors (1)

The lukewarm demand reflected the less favorable tax treatment compared to last year’s issuance. The treatment of future retail issuance will be up to the government, Deboutte said. He added the debt agency may publish an update to its funding plan in the coming weeks or months after reviewing the result.

Aside from the tax reduction, the coupons were also lower than the 3.3% coupon on September’s note. Altogether, it was inevitable that demand would be lower this time round, said Charlotte de Montpellier, senior economist at ING Bank NV. 

“There was such a big buzz about the state bond during the summer,” she said. “Now rates are lower there is not so much liquidity left that people still want to invest.”

(Updates with comments from Belgian DMO from paragraph five.)

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