Transcript: Interview with Belgian DMO Director of Treasury Maric Post

28 March 2025

By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 14 March 2025 with Maric Post, Director of Treasury and Capital Markets of the Belgian Debt Agency.

Q: Mr. Post, a few days ago you sold €5 billion in a new June 2042-dated OLO. How did that transaction go?

A: Very well. Of course, looking back, we've been extremely fortunate because it was just the day prior to the announcement by the German government about their plans to loosen the budgetary discipline they have imposed for so many years. That was a complete game changer for the market, so being able to issue that kind of an amount at a rate that was still 40-45bp lower than it is now was very fortunate. Apart from that, the transaction itself was a very strong and solid one. We had €37 billion in order books for a €5 billion deal which was the highest cover ratio for a Belgian OLO in the maturity bucket of 15-20 years. Altogether, it was a very good and solid deal that went very smoothly.

Q: Why did you go for such a long tenor?

A: The alternatives for us this year were a bond in this 15- to 20-year area or maybe even a longer one, a 30-year bond, which was also the suggestion of a number of our primary dealers. It was going to be a long bond anyway as that was what we had announced in the funding plan at the end of last year. This maturity had the strongest market support and strongest demand outright. We were also helped a little bit by the fact that France had already issued a bond in a similar maturity. Given the way we often trade in pair to France, having that bond as a direct comparison was certainly also something that helped in making the decision.

Q: You mentioned that one of the suggestions by primary dealers was a 30-year bond. Are you expecting to issue this bond anytime soon, in 2025?

A: No. In our funding plan we have announced three syndicated transactions. Among the new bonds this year we have a 10-year bond, as usual. That's often our first deal of the year. Then we announced and issued a long bond. That's the 17-year bond that we now issued. We have also announced that we would issue a 5-year bond, the third syndicated transaction. Apart from that, throughout the year we also issue bonds in auctions. Here, if there is demand for it, we can certainly issue bonds in the 30-year area where we still have an on-the-run 2055 bond. We have a 2057 and a 2054 bond as well, so there are ample options for us to issue in the 30-year area if demand materialises.

Q: So, it is not completely off the table to issue a 30-year bond if market conditions are encouraging.

A: In auction format. That is certainly on the table. I expect that at least at some of our auctions there will be demand for the 30-year bond and it would be quite normal to issue in that maturity bucket throughout the year.

Q: Is the longer part of the curve attracting the most demand now?

A: It had been mixed before our syndicated transaction. We felt that the demand for duration maybe wasn’t that strong. But now, given the steep rise seen in interest rates, we see demand return to the very long end of the curve. Also because yields are around 4% on the 30-year part of the curve for us and for France. And that creates the outright demand from real money investors to engage in this kind of maturities. So, we are seeing demand again after the recent rise in interest rates.

Q: You're still planning to issue the 5-year benchmark bond at some point in 2025. When should we expect this issuance to take place?

A: It is not predetermined. We keep all the options open in order to be able to tap the market when it is most optimal. If you look at the historical pattern, in most cases syndicated transactions are executed in the first half of the year. However, we have also issued a third bond in September sometimes, for example. So, that's also a possibility. There’s no precommitment in this regard from our side, but we will be monitoring the market to choose a good opportunity and a good moment to come to the market with that 5-year bond.

Q: In your debt management strategy report for 2025, you say that if investor demand and major changes in the yield environment warrant issuance in different maturities, this can of course be considered. Do you envision such a change, given what has happened since the publication of this report?

A: It is certainly something to take into account, but in terms of the maturities for the syndicated transactions, there's no need to change it anymore. Now that we have done the 10-year and this long bond, a 5-year bond is always going to be, let's say, the less challenging of these syndicated transactions. I can't really see a scenario where we would step away from the issuance of a 5-year bond as the third syndicated transaction. I think we will be able to stick to the plans we announced at the end of last year.

Q: The agency also plans to buy back bonds maturing in 2026 for an amount of €2.5 billion. Which bonds could be eligible for those buybacks?

A: Only the bonds that mature within the year. We have a programme where we try to stimulate the sale of bonds that mature within the year back to us. And then of course we see that as a way to encourage investors to reinvest in longer maturities. That can certainly work well with the steepening of the curve seen lately. We will buy back bonds that mature within the next 12 months, and that will also be the case for the bonds that mature in 2026. There's one bond maturing in March 2026, so we'll start to buy that back at the end of this month.

Q: Belgium's debt has the highest average life of all, but it is one of the most indebted EU-19 countries. Are you willing to stick to a number above 10 years?

A: For the moment it's certainly something that we envisage to do. Even with the slightly shorter issuance mix from last year and also this year, where we issue also quite some volume in the 5-year area. Even then, our average maturity of newly issued bonds will be probably around 13 years, and that is enough to keep the average maturity at a level above 10 years. In terms of our guidelines, the risk appetite set for us by the Minister of Finance is at 9.25 years. So, the average maturity should remain above that figure of 9.25, but we're very comfortably above that. Given the issuance that we expect this year, we will probably still finish the year with an average maturity of above 10 years.

Q: You delivered a retail issuance of state bonds on March 4th. How did this go?

A: The state note programme was very much in the news two years ago when we had this massive €22 billion issuance in September 2023. That was a very special campaign because it had a special tax treatment. Last year we've seen some retail investors rolling over that maturing bond, but no longer with a tax advantage, so amounts were a lot smaller. For us it is good that this programme has come under the attention of retail investors again, because it is on constant offer. Every three months the debt agency issues these retail bonds. We hope that with rates at current levels there might be some more interest to continue investing in these kinds of products. But it's clear that the real success and very big amounts are achieved whenever there's a tax advantage to it. That's certainly a way to incite the Belgian retail investor to invest in these kinds of products. Even now on March 4 we issued €140 million worth of these bonds. If we can keep that going at a rhythm that provides between €500 million and €1 billion of new funding every year, it will be a good achievement. It means that the product remains in the interest of investors, so that whenever it is needed, we can easily tap that market.

Q: Should we expect any more tax advantages in this retail issuance soon?

A: As far as I know, that is not on the agenda for the moment. But of course, there are a lot of discussions going on about the funding of defence expenditures. One of the things that's already been floated in the press was to launch a defence bond to the retail public, given the past success of this retail bond. That is of course an option, but in the end we suppose the government will use the cheapest and most optimal funding options.

Q: Is this an idea only a rumour or has it been pondered within the Belgian debt agency?

A: No. It's not coming from us. It's a rumour, something that's been mentioned in the press as a possibility to once again stimulate retail issuance. But for now it's not more than an idea. However, given the success that this product has had in the past years, some people think about this as a way of accessing funding in a different way.

Q: And do you think at some point the agency will ponder it?

A: If the government requests it, then of course it's something that we will look into. But we don't have the means to decide whether we will give a tax advantage or make the issuance attractive in any other way. That should always be of course a government decision.

Q: Are these retail insurances all predetermined, or is there any space for an issuance to be more opportunistic?

A: There are no rules to stick to a given date, but it is a programme and there’s an issuance every three months. So, if there were to be an issuance for a specific goal, I can imagine it can be fitted into that calendar of quarterly issuance.

Q: In this year's strategy, you also mentioned the possibility of reopening both existing green bonds. What would make you go for one or the other or both?

A: That’s driven by market demand. In our auctions we issue bonds that are suggested to us by the primary dealer group as being demanded by investors. We can do it with regular auctions, where there is competitive bidding by all of the primary dealers, and there are also optional reverse inquiry auctions, where we can be more responsive to provide dealers with bonds that are a little bit harder to find in the market. So, both options are open for us. Indeed, last year we used both methods to tap the green bond market.

Q: Is the issuance of a new green bond totally out of the question or are you considering it?

A: Not for this year, because the only remaining syndication is going to be the 5-year bond and that's probably too short to make it a green bond. If we were to issue a new green bond, it would be next year at the earliest.

Q: In your strategy report you also say that the OLO issuance will be supplemented by alternative financing instruments which can be hedged foreign currency issuances. Which foreign currency is offering the best opportunity right now? Will you go for a USD issuance like Canada did a few days ago?

A: It's a possibility. We're always on the lookout for the opportunity to do this. We need to see an arbitrage in terms of funding cost compared to our own curve. That's often very hard. We had a number of years where it was outright impossible to beat the funding cost of the OLO curve. Last year that changed and we were able to do a few USD bond transactions in March and towards the end of the year. If the opportunity arises, we’ll certainly look into it. Now it is hard to achieve an arbitrage. But the USD is probably the closest contender.

Q: Are you considering a foreign issuance with other currencies apart from the USD?

A: That is perfectly possible. But in general it's hard to get these arbitrage levels. Probably the only obvious currencies where you can do it is either in USD or maybe from time to time in Nordic currencies or Sterling. But doing it in other currencies is extremely hard.

Q: Has the Belgian agency had any discussion with the government or are there any ideas of what the boost in defence spending in Europe might mean for issuance going forward?

A: There have been no discussions with the government yet. From what we read and hear, the government is discussing it internally. There are rumours. There's talk about funding a defence fund not with new issuance but using instead the proceeds from sales of a number of assets that the government still holds, or with its dividends.