LONDON, Dec 7 (IFR) - Belgian banks' prudent approach to the
opening of the country's covered bond market should be the model
adopted by Asian and Latin American issuers who are next
expected to make use of the financing tool.
The careful preparation, attractive pricing and time given
to investors to assess the secondary market performance of
Belfius' debut deal stand in stark contrast to the unseemly
scramble by the Australians when they opened up their sector a
Australia's top four banks oversaturated the US dollar, euro
and sterling markets by printing bonds in quick succession,
leaving no room for performance. ANZ's US dollar debut in
November 2011 was followed just two days later by Westpac.
Belfius opened things with a bang in November, luring
EUR5.6bn of orders for an inaugural five-year that priced at
mid-swaps plus 45bp.
"Belfius spent a lot of time with investors because it was
the first deal to come out and it was important for it to do
well," said Chris Agathangelou, fixed income syndicate at
The deal performed in the secondary market, tightening in by
13bp before KBC took its turn. Nearly two weeks later, KBC went
a step further and managed to attract orders of EUR6bn for the
EUR1.25bn five-year that priced 2bp inside Belfius's deal but
still offered investors an attractive pick-up to the underlying
"Belgian banks are showing there is strong demand for the
country's assets," said Rik Janssen, group treasurer at KBC.
"With this deal we tried to balance our need for low cost
funding with investors' desire for attractive spreads on bonds
that perform well in the secondary market."
The new funding source will give Belgian banks access to a
wider pool of investors and allow them to diversify their
"We plan on putting an emphasis on covered bond funding in
2013," said Janssen.
"There have been several instances when the senior unsecured
market has been closed in the past two years for the European
banking sector and we think covered bonds will give us greater
flexibility in our funding."
BNP Paribas Fortis and ING Belgium are watching developments
and will have been encouraged by the reception Belfius and KBC
Until now, Belgian banks have been at a disadvantage to
other European credit institutions as they cannot offer
investors UCITS and CRD-compliant bonds. The ability to issue
under a legal framework is expected to improve their cost of
"It is great to see Belgium open up its covered bond market
in such a positive fashion. This Belgian debut underscores the
positive momentum in the covered bond market is intact," Jens
Tolckmitt, chief executive of the Association of German
Pfandbrief Banks (VDP).
The additional flexibility covered bonds offer is
increasingly attractive to a number of countries in Latin
America and Asia. Singapore is poised to introduce guidelines
allowing the issuance of covered bonds in the city state in the
Once the framework is in place, bankers believe that
Singaporean lenders will waste no time in issuing secured debt -
potentially even before the year-end. This is where Belgium's
strategic approach will hopefully be replicated.
(Reporting by Aimee Donnellan; editing by Alex Chambers &