Belgium sells record $23.7 billion retail bond to investors: Report

By Lyubov Pronina

Belgium sold €21.9 billion euros ($23.7 billion) of bonds to households on Monday, Europe’s biggest-ever debt offering targeted exclusively at retail investors, according to data compiled by Bloomberg, as the nation sent a message to banks that have been slow to raise saving rates.
 

More than 600,000 people poured into one-year note, according to a statement from the Belgian Debt Agency. The 3.3% coupon on the debt compares with an average rate of 3.13% for Belgian deposits of up to one year, European Central Bank data show.

The offering was “intended to stimulate competition” among banks who must “regain the confidence” of savers, Finance Minister Vincent Van Peteghem said in the statement. “The success of the issue, the rate hikes by certain banks and the increased demand from savers for products other than the savings account contribute to this objective.”

Governments from the UK to Hungary are increasingly tapping households for funding as rising yields make sovereign bonds more attractive to savers weary of years of zero or negative rates. 

“Belgians have massive savings in the bank that are very sticky so indirectly it is also a plan to make use of these huge amounts in a slightly more productive manner and potentially entice banks to increase their remuneration,” said Ronald van Steenweghen, an investor at Brussels-based Degroof Petercam Asset Management.

Initially, only €250 million in retail bonds was targeted for the entire year. Following today’s sale, Belgium’s debt office cut its planned 2023 bond issuance for institutional investors — so-called OLOs — by €2.9 billion, to €42.1 billion. Another one-year retail bond sale may be held in December, according to the statement. 

The generous returns on government retail offerings put pressure on lenders to pass through higher central bank rates to customers’ savings. Banks are still flush with cash after years of monetary stimulus and have drawn fire for dragging their feet on raising rates.

“In June, there were a lot of complaints towards the government from political parties as people got very frustrated at banks not increasing savings rates as much as they would have liked,” said Charlotte de Montpellier, a senior economist at ING Economic Research. “So the government intervened with a product available to everyone, at a higher rate.”

Monday’s deal trumps the previous record when the country raised €5.7 billion from retail investors during the euro-area sovereign debt crisis, thus sidestepping the surging yields demanded by professional investors.

In June, Italy raised more than €18 billion in BTP Valores debt, a record amount for an Italian offering pitched at households. 

Jean Deboutte, head of Belgian debt agency, said he expects other countries to follow Belgium’s example in the Euro area, possibly with bigger sales.