MNI INTERVIEW: Fiscal Concerns Overstated - Belgian Debt Chief

Fears over the Belgian fiscal deficit have been exaggerated by investors and could subside, with positive effects on yields, Belgian Debt Agency Executive Committee Chairman Jean Deboutte told MNI, adding that he was interested in issuing bonds with maturities of over 10 years.

"I think the market may be overestimating a little bit the impact [of the budget deficit] at some point in time. So we see some relaxation there,” Deboutte said in a phone interview, as the country’s 30-year bond yields exceed 4%. “At the level of 4% it's not very cheap for us, but it's not overly expensive, and we have seen the value of issuing very long-term debt in the structure of the portfolio.”

Belgium's 2026 debt issuance plan will be published on Dec 5, and its main priority will be new liquid benchmarks, he said. (See MNI INTERVIEW: Finland To Issue New 10-Year Benchmark Bond)

"We expect three of them to be created, three new OLOs," in addition to tapping existing lines, he said. "We will be interested in issuing paper above ten years.”

While there has been less interest from Asia and central banks, demand has come from other areas, he said.

IBERIAN INTEREST

"We see interesting demand coming up from Spain and Portugal now, because we are in a position which is completely opposite, offering higher yields than the domestic market," he said, noting how Belgian bonds have lost some ground versus issuers such as Spain and Italy.

"Foreign buying remains, of course, predominant," Deboutte said, "Commercial banks have been big buyers.”

The spread between German and Belgian bonds has remained quite stable, he noted, as Germany has relaxed its debt brake. June’s rating downgrade of Belgium by Fitch Ratings to A+ essentially confirmed market pricing, he said, though he added "if there is a second downgrade, then maybe there will be a somewhat bigger effect.”

STATE NOTES

Belgium has issued bonds directly to retail investors through its state note (Bond d'Etat) programme in recent years, and Deboutte noted that this still provides higher returns than savings accounts. (See MNI INTERVIEW: Estonia Likely To Favour Longer Maturities)

"We had some successful 10-year State Notes, so we see that there's appetite for Belgian households to invest in long-term government debt as well at today's rates, also because inflation has come back to levels of 2%, so people see a net return with taxes of more than 2%," he said.

"That's another product that we can use in times of stress should our splits come under pressure," he said.

"It's more something that we keep in reserves for the high amounts, but even in normal times, we can issue quite a lot of that.”