The country’s debt agency wants to term out its debt maturity with an inflation linked deal with a maturity around 12 years, while a “very long syndication” is also in the pipeline, Anne Leclercq, director of treasury and capital markets at the agency, said at the International Capital Market Association’s annual general meeting last week.
On June 4, Belgium printed its first inflation linked bonds, raising €300m at an even longer part of the curve. The sovereign placed a pair of €150m privately placed inflation linkers through BNP Paribas Fortis, selling a 0.15% 20 year note and a 0.25% 25 year clip.
Belgium used its euro medium term note programme to sell the notes — a method it might repeat for a syndicated inflation linker, according to a head of SSA syndicate.
“I don’t think Belgium will build a linker curve like Spain has done, it will be more opportunistic funding,” he said. “It might issue a linker in benchmark size but it would probably be in EMTN, rather than OLO format.”
There is a window of issuance available this week if Belgium wanted to bring the syndicated linker, the syndicate head added.
However, the “very long syndication” is on hold for the moment, reflecting a volatile market backdrop in long end European rates, Leclercq said at the ICMA conference. Last week the 10 year Bund yield doubled to 1% from its close at the end of the previous week, with 20bp intraday moves on Wednesday and Thursday, according to Barclays rates research.
“We’re terming out our debt to the point where it will be the second longest in the eurozone, after Austria,” said Leclercq. “We aim to stabilise the service cost of the debt.”
According to its annual report, Belgium had an average debt maturity of 7.61 years at the end of 2014.
As well as the linker and long-dated syndication, Belgium is also looking at sterling and dollar trades with a maturity longer than seven years.
Leclercq noted that recent volatility had been extreme, but said a little volatility was helpful for a sovereign issuer as it raised profits among the primary dealer group.
She said that Belgium was looking into changing the methods it uses to evaluate its primary dealers, “to make sure market makers were still incentivised to do their job”, against a backdrop of tougher regulation on holding trading inventory and hedging using long-dated swaps.
Leclercq said that market liquidity did not only consist of bid-ask spreads and volumes, but also immediacy and resilience — harder concepts to comprehend and measure.
This refers to how large a single trade can be, and how much spreads change in response to a given trade.
Belgium has completed 60% of its funding for the year.
