Governments in the European Union have used up any room they had left to lower their interest rates, as European bonds have been oversold, taking related exchange traded funds (ETFs) for a ride.

Meanwhile, forecasts for Belgium’s economy are claiming a 4% decline this year, according to the Organization for Economic Cooperation and Development. The projections are more pessimistic than the actual country’s are – Belgium sees a contraction next year of 0.5%, says Philip Blenkinsop for Reuters.

Belgium has a heavy dependence on world trade; exports make up more than two-thirds of the country’s gross national product. Countries that rely on trade have been hit especially hard in the recession.

About $26.6 billion has been sold off as European bonds declined, sending the German bond, Europe’s benchmark security, up from a one-month low as a report showed Europe’s manufacturing and service industries shrank in June at the slowest pace in nine months. Despite this, governments are still issuing lots of debt and high price levels are still evident, reports Anna Rascouet for Bloomberg.

Germany will not be turning to investment banks to sell their regular debt this year. Belgium is continuing to issue notes, as their system is “winning” and everyone wants to buy German bonds. German bonds returned 0.6 % this month, compared with a 1% loss for U.S. debt, according to Merrill Lynch.

• iShares MSCI Belgium Index (EWK): up 17.1% year-to-date

• SPDR Barclays Capital International Treasury Bonds (BWX): up 0.3% year-to-date; Belgium is 4.6% of assets

For more stories on Belgium, visit our Belgium category.

Tags: Belgium, Bond ETFs, BWX, EWK, Global ETFs, International Treasury Bonds