Belgium raises strict minimum in bond sale

19th January 2011, Comments 0 comments

Belgium raised the strict minimum in a bond sale with the national debt agency on Wednesday blaming muted demand on contradictory statements made by EU finance ministers on eurozone crisis funds.

The country, hit by higher borrowing costs in recent weeks due to its marathon political crisis, raised 3.0 billion euros ($4.0 billion) by selling 10-year bonds to a banking syndicate on Tuesday but had hoped to raise much more.

"We could have done better," Jean Deboutte, strategy and risk management director at the Belgian Debt Agency, told AFP.

"It was going very well until just before 2:00 pm (1300 GMT)," Deboutte said when the operation fell "victim" to statements made during a meeting of European finance ministers who "did not all say the same thing" in a debate on whether to change a 750-billion-euro EU-IMF financial safety net.

The European Commission has called on European Union leaders to reinforce the fund as soon as possible but eurozone paymaster Germany said there was no urgency to act.

"Investors reviewed their commitments, the spreads rose," Deboutte said, referring to the difference between the interest rates of Belgian bonds and the benchmark German bund.

"It's a great shame and very frustrating because the 5.0 billion euros (we were looking at) were there," he said.

Belgium offered a coupon rate of 4.25 percent for the 10-year bond -- the fixed return on the paper -- with investors getting a real return estimated at 4.37 percent after the sale, he said.

The yield nonetheless remained "historically very low" and "very comfortable," Deboutte said.

By comparison, Spain raised 6.0 billion euros in a similar syndicate sale on Monday at a rate of 5.60 percent.

Belgium has had to pay higher rates or return recently to buyers of its debt as markets and officials express worries about the failure by Flemish and French-speaking parties to form a government seven months after elections.

Belgium's public debt reached 97.2 percent of gross domestic product last year, way above the 60 percent EU limit.

© 2011 AFP

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