Tue, Feb 28, 2023 page10

• Belgium turns to small-time savers to raise cash

  • Bloomberg
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  Belgium is looking to raise more cash from ordinary citizens, after years of sub-zero rates in the eurozone brought its retail program to a standstill.

  The European nation plans to lure mom-and-pop investors with a 10-year bond that pays a 3 percent coupon, or more than 1 percentage point higher than the rate offered by Belgian banks on deposits of up to 12 months.

  A three-year note is also on offer with a 2.60 percent interest rate. The goal is to raise 250 million euros (US$264 million) through sales this year, with the possibility of borrowing more if there is demand.

  “This is our moment to offer something attractive,” said Jean Deboutte, director of strategy at the Belgian Debt Agency. “We can then adapt it for the next year onwards and hopefully get more in the funding plan — but let’s first see the evidence.”

  A larger retail program could potentially pave the way for a green retail bond to be launched if demand allowed, Deboutte added.

  Belgium is among the European countries hoping higher bond coupons would tempt small-time investors to buy more government securities, thus supporting bond markets as central banks exit.

  Local savers, for their part, could find the coupons an alluring alternative to new term deposits in Belgian banks.

  Belgium restarted its retail debt program last year, raising a total 110 million euros after a three-year hiatus when interest rates and government debt yields were rock-bottom.

  Belgian 10-year yields have risen by more than 350 basis points since the beginning of 2021, and the 3 percent coupon on the retail bond is the highest Belgium has paid for comparable-maturity paper since 2012.

  Deboutte said the coupon represented “quite a competitive offer,” adding that the government’s offering tracks the repricing in market rates more closely than bank deposit rates.

  In contrast, new term deposits for up to 12 months in Belgium paid 1.74 percent as of December last year, according to the latest data from the European Central Bank.

  Retail investors’ cash is also being targeted by Italy, which sees them as a “key element” of its debt management strategy and plans an inflation-linked bond next month aimed specifically at this segment.

  Investors and dealers have suggested Britain should tap retail investors for financing as it steps up its borrowing program.

  Meanwhile, Spaniards frustrated with miserly bank deposit rates are opting for government bonds — online debt purchases by Spanish retail investors last month amounted to about as much as the total sold for the whole of last year.

  Retail investors are unlikely to compete with professional investors as a source of financing — the Belgian retail program plans to raise just 0.6 percent of the amount set to be raised via debt sales this year.

  However, they can play the role of a steadfast anchor. During the eurozone sovereign debt crisis, Belgium raised a record 5.7 billion euros from retail investors, thus avoiding paying the surging yields demanded by professional investors.

  “It shows you the strength of having such a product and such a diversification,” Deboutte said. “It is really a very stable investor force.”

  The debt office has started taking bids for the bond and is to close the books mid-week.
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