Belgian Sovereign

Investor hesitance in the face of a rates sell-off that took up the whole of May and shows no sign of abating has resulted in dwindling enthusiasm for SSA new issues as the EIB and Belgium have found out so far this week.

Belgium has launched a five year dollar Eurobond designed to exploit an arbitrage opportunity thrown up by a move in the euro/dollar basis swap. The deal will be priced later on Monday although the deal remains some way short of fully sold.

Belgium printed on Wednesday its first floating rate note in OLO format since February 2011. The deal was a response to demand for investors and banks looking for paper that offers protection against potentially increasing rates.

Belgium responded to bank demand for floating rate paper on Wednesday by announcing a five year FRN. The sovereign, which will price the deal later on Wednesday afternoon, was approached by banks which have been looking to print such a deal for some time.

SSA issuers are queuing up to print new business after a week that saw a rampant dollar market which included $10bn of new funding for the EIB and KfW and the first Spanish dollar trade in four years, and a euro market which gobbled up a new Belgian OLO and forgave Agence Française de Développement for attempting too tightly priced a deal a fortnight ago (see separate coverage).

The euro market was easily outshone by dollars this week. While it produced a pair of benchmarks that were comfortably oversubscribed, the concession that issuers had offered contrasted sharply with dollars, where three issuers priced $13bn of debt in just 48 hours at levels right on top of their curves. But that’s no reason for despair, the euro market is still robust.

The Slovak Republic has mandated banks for its first benchmark syndication of the year — a 10 year in euros. The four leads are expected to start taking indications of interest on Tuesday afternoon. Meanwhile Belgium was set to pay a 4bp-5bp new issue premium to get a five year benchmark away.

Kingdom of Belgium has mandated four banks to run its first benchmark of the year, and looking at the initial price thoughts, bankers away from the deal predict it will fly off the shelves.

The Belgian 10 year syndication was a good looking trade but amid the obvious good news of a €7bn book and pricing through guidance, there was a feature of the syndication that may have been missed by most but would be a welcome feature to public sector bookbuilding exercises.

Bankers are preparing their RFPs for the European Financial Stability Facility (EFSF), which is expected to price its first euro trade of the year next week and is thought likely to want to print big. Meanwhile, the Kingdom of Belgium’s first syndication in nine months roared into the market today, booking over €7bn of orders.

The Dutch State Treasury Agency (DSTA) is considering the possibility of issuing a dollar bond as part of a funding programme that has seen a slight reduction in size from 2012. The borrower is one of three north European sovereigns to announce their funding plans for 2013 this week.

The Kingdom of Belgium locked in 30 years of funding at an attractive spread to secondaries late last week as it took advantage of German demand for Belgian paper.