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State notes
Long-term Belgian debt obligations intended for non-professional investors. These are fixed-income securities and annual coupons with a maximum duration of 3 to 10 years. They are issued via subscription among investment institutions approved by the Minster of Finance. In principle, there are 4 issues per year : in March, June, September and December.
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Securities account
An account containing transferable securities.
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Short-term debt
Debt issued with a maturity of less than one year. Only the interest to be paid on this debt is borne by the general expenditure budget (public debt section), since the proceeds from issues and the repayment of capital are considered as Treasury banking operations.
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Secondary markets
Markets where transactions are made pertaining to the financial instruments outstanding. There are two regulated markets for the debt securities of the federal government:
1. Brussels Euronext, where linear bonds (OLO) and state notes are listed in particular;
2. the off-exchange secondary market for linear bonds, strips and Treasury certificates. The trading of these securities can also be carried out outside of any regulated market, on condition of the explicit authorisation of the investor. -
Schuldschein
A loan agreement under German law whereby the borrower promises the lender to repay a set amount at a set date for a set compensation. For this contract, which is particularly interesting for German investors, the accounting treatment allows the investor to account for its receivable without the regular revaluation of its value and therefore without the accompanying volatility. Since the transferability of these loans is limited, the product is especially interesting for 'buy and hold' investors who wish to make long-term investments, such as insurers and pension funds. In exchange for this advantage and the possibility of adapting the characteristics of the contract for investors (duration, amount, etc.), the compensation is lower, which is advantageous for the Belgian Treasury.
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Stripping
See "Be-strips"
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Securities Settlement System
A system of securities settlement managed by the National Bank of Belgium, formerly referred to as the Clearing system, which ensures the secured execution of transactions pertaining to securities which are mainly issued by the Belgian state in both the primary and secondary markets.
The system also handles the taxation on the securities (see X/N). -
SSS
See " Securities Settlement System"
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Swap
Interest rate swap
Is an exchange of payments of interest rates between two counterparts. In the case of a standard interest rate swap, a counterpart receives fixed rate from another counterpart and pays floating rate to the other counterpart. An interest rate swap is mainly used to manage interest rate risks.
Currency interest rate swap
Is an exchange of payments of interest rates of two different currencies between two counterparts. In the case of standard currency interest rate swap, the counterparties concerned exchange between themselves the principal in the different currencies and this at the beginning and the end of the swap. A currency interest rate swap is mainly used to manage currency risks.
FX-swap
Is the simultaneous forward purchase and sale of two different currencies. The maturity is short and this instrument is mainly used to manage currency risks.
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Syndication
When the Belgian Debt Agency decides to launch a new OLO line (with a new coupon and a new maturity), it makes use of the syndication technique for the first tranche and not the auction system.
Since 1999, the Belgian Debt Agency has systematically used the syndication technique which has the great advantage of making it possible to issue huge amounts (up to EUR 5 billion) at once. Thus, these OLOs have immediately a high degree of liquidity. Another advantage consists in the use of an order book which enables the Belgian Debt Agency to keep a close watch on investors, which is not the case for auctions to which only primary and recognized dealers have access. During the allocation of orders, the Agency aims at highly diversifying the type of investors and their geographical location.
During a syndication, the Agency appoints some dealers among the body of primary dealers as Joint Lead Managers and the other primary dealers are invited to act as Co-lead Managers. The recognized dealers belong to the Selling group.
Besides several tasks, the main function of the Joint Lead Managers is to sell the main part of the issuance to their clients. The rest of the amount is dealt with by the Co-lead Managers and the Selling Group.
