MNI INTERVIEW: Yields Tilt Belgium To OLOs, Away From EMTNs

Belgium is likely to raise the remainder of its 2021 funding requirements earmarked for Euro Medium Term Notes by selling OLO government bonds, given favourable yields for euro-denominated debt, the director of treasury and capital markets at the Belgian debt agency told MNI.

"If we were to see a sudden possibility for sizeable EMTN funding, we would still consider it and re-assess the situation," Maric Post said in emailed responses to questions. "Whether that could involve increasing our pre-funding would be one of the elements to consider. We would certainly keep all of our options open."

Belgium only sells EMTNs, which can be issued in dollars or other currencies, if they provide cheaper funding than OLOs, he noted.

"Given the current richness of the OLO curve, our base case by now is to expect that the remainder of the EMTN program will be funded in the remaining OLO auction," Post said.

GREEN BONDS

The Belgian government has asked the agency to look into a green OLO, but work is still in the preliminary stage and details such as maturities have yet to be decided, he said. Grants made available to Belgium from the NextGenEU programme, some of which will be directed to green projects, will have no effect on the eventual volumes of green OLOs, as the EU-funded projects are all new, Post said.

Nor is there a danger that the arrival of the EU itself as a significant borrower could push up Belgian borrowing costs.

"The [EU] issuance has been flagged well in advance and we cannot see any detrimental effect from this on investor interest for our own OLOs," Post said. "On a very practical level, the EU is an important additional issuer that will be in the market with its own slots for syndicated transactions and auctions and in that respect the good coordination between the issuers will be/remain important."