Belgian Sovereign

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.

Belgium joined the streak of SSA issuers tapping the dollar market on Wednesday, when it printed a tightly priced $1.25bn September 2015 Reg S benchmark on Wednesday.

Portugal’s plan to muscle its way back into the capital markets via its euro medium term note (EMTN) programme has been met with derision by dealers. However, the sovereign managed to achieve its lowest six month treasury bill yields in nearly two years suggesting there may be growing appetite for the credit as yields tumble for better-rated names.

Money market funds buying European government debt facing a drought in yield should turn their attentions to non-triple-A rated commercial paper, analysts have suggested. But with a number of split-rated borrowers such as Belgium, France and now the EFSF offering negative yields in money market instruments, fund managers’ quests for yield could be hindered.

The EFSF has become the latest issuer to move into negative yields in its short dated instruments. But despite the historically low rates the rescue fund is still not regarded as a safe haven.

Standard & Poor’s placed 15 eurozone sovereigns on CreditWatch with negative implications on Monday. Six of those countries, including Austria, Germany and the Netherlands, are rated triple-A.

The positive tone to the European government bond market this week could be short lived if Europe’s leaders fail to tackle the continent’s fiscal problems at next week’s summit, warned bankers.