Belgium's successful issuance of special one-year "Van Peteghem bonds" is easing concerns over the country's soaring levels of public debt, Belgian officials and analysts say.
According to Debt Agency Director Jean Deboutte, high demand for the bonds means that the Federal Government will probably not need to raise additional funds through more traditional financial instruments such as Linear Ordinary Bonds (OLOs).
"It is becoming likely that we will not carry out certain scheduled short-term borrowings," Deboutte told l'Echo. "We are going to reduce all the planned issuances. We were already expecting it."
The bonds, named after Finance Minister Vincent Van Peteghem, offer an attractive alternative to the savings rates currently provided by Belgian banks. The effective yield of the bonds is 2.81%, well above the long-term savings rate offered by most commercial financial institutions.
Debt Agency Director Jean Deboutte. Credit: Belga / James Arthur Gekiere
Despite only going on sale on Thursday morning, €1.15 billion worth of the bonds have already been purchased. De Tijd quoted Deboutte as "not ruling out" economist Bruno Colmant's earlier prediction that up to €20 billion could eventually be sold.
De Tijd columnist Baert Haeck also pointed out that, if Colmant's forecast is borne out, the bonds will raise a substantial proportion of the €51.07 billion that the Debt Agency previously estimated Belgium would need to borrow this year.
"If the purchased amount rises to €20 billion, the government will raise more than a third of the money it has to borrow this year in one fell swoop," Haeck noted.
'An extraordinary breath of fresh air'
News of the bonds success provides follows months of unease among analysts and investors over the perilous state of Belgium's public finances.
According to the most recent figures released by Eurostat, the EU's official statistics office, Belgium recorded a debt-to-GDP ratio of 107.4% in this year's first quarter: the sixth highest in the EU, and well above the bloc's legal threshold of 60%.
Eurostat also noted that Belgium's public debt as a proportion of GDP rose by 2.3 percentage points compared to the previous quarter: the second most rapid increase in the bloc after Luxembourg. At 3.9% of GDP, Belgium's fiscal deficit also remains well above the EU's 3% limit.
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Speaking to l'Echo, Colmant suggested that the bonds' success shows that the Belgian State has once again become a "credible alternative for private investors".
"[The issuance of the bonds] is also the consequence of the cessation of the financing of the debt of the EU Member States by the European Central Bank [through, e.g., quantitative easing]," he explained. "As a result, States must fall back in particular on domestic savings, which can provide them with an extraordinary breath of fresh air."
