Belgium: State Note Issuance Breaks Records with €21.9 Billion Raised

In a historic move, the Belgian Debt Agency achieved unprecedented success with its recent issuance of a one-year State Note. The Note, maturing on September 4, 2024, witnessed an overwhelming response from retail investors, with over 500,000 savers contributing a staggering €21.9 billion.

The issuance, labeled “Europe’s biggest-ever debt offering targeted exclusively at retail investors” by Bloomberg, offered a 3.3% gross coupon, surpassing interest rates offered by banks. This move aimed to stimulate competition among banks, send positive signals to financial markets, and provide households with an attractive short-term investment option.

The Minister of Finance’s strategy proved immensely successful, as the demand for the State Note far exceeded previous records. The 2011 “Leterme Notes,” which raised €5.7 billion, were dwarfed by the recent achievement.

The massive response led to a notable shift in retail savers’ preferences, with substantial funds flowing from traditional savings accounts to the State Note. While this shift represents a considerable outflow for banks, their robust profitability levels are expected to absorb the impact.

From a public finance perspective, the State Note’s yield, based on the federal government’s financing costs, is expected to have a positive effect. The Belgian Debt Agency plans to invest the raised funds in interbank and repo markets, expecting returns to exceed the note’s financing costs.

In light of this success, the Debt Agency has adjusted its funding plans for 2023, scaling back Treasury Certificates and OLO issuances. The move underscores the significant impact of retail investors on Belgium’s debt landscape and reaffirms the government’s commitment to innovative financial instruments.