WHAT ARE BUY-BACKS?
- The buy-back by the Treasury of an OLO is the reverse of an OLO issue: the Treasury buys back OLOs for a certain amount after which, in general, the securities bought back are amortized.
- The buy-back program applies to bonds with a remaining life of 12 months or less. It gives investors the possibility to sell their securities before final maturity. By buying back OLOs, the Treasury pre-finances future OLO redemptions.
- The primary dealers can offer the bonds to the Treasury via the telephone. Pricing transparency is ensured by the fact that the Treasury displays bid prices on MTS Belgium on every working day, during at least 4 hours. The primary dealers can also sell their bonds through MTS Belgium at the posted price.
How are OLOs bought back through a reverse auction?
The Treasury can also organise a reverse auction so as to buy-back, at once, a larger amount of one or more bonds.
During a reverse auction the primary dealers introduce their offers and indicate the nominal amount and the proposed buy-back price.
In the case of a reverse auction, the Treasury sets a maximum price under which all offers are accepted.
- The offers proposed at the maximum price may be proportionally scaled down or totally accepted.
BE-Strips and fungibility
Since 1992, the capital as well as the remaining interest payments (coupons) of an OLO can be negotiated as dematerialized and independent zero coupons. Belgium was after France (1991) the second country of the euro area that allowed the stripping of bonds (OLOs).
Since 2011 these zero coupons are made fungible if they have the same maturity date; irrespective the capital or the interest payment which they represent. Zero coupons can be reconverted to OLOs with the same maturity date, when zero coupons are added in proportion to the remaining interest payments.
A consequence of fungible strips is that at the reconstitution synthetic OLOs can be created. The outstanding amount in a particular OLO-line can as such exceed the amount that was initially issued on the primary market.
For BE-Strips with coupon 28 March en 28 September no CAC clauses were added. BE-Strips with coupon 22 June and 22 October do have CAC clauses.
Advantages of investing in Strips
- Coupons must not be reinvested.
- The duration of a strip is longer than the duration of an OLO with the same maturity date.
- The yield curve of BE-Strips is more convex than the yield curve of the underlying OLO.
The price of BE-Strips is calculated as follows
n = the number of complete years between the value date of the purchase and the maturity date of the BE-Strip
f = the number of days between the value date of the purchase and the original maturity date of the coupon (in casu 28 March, 28 September, 22 June or 22 October) divided by 365 or 366
BE-Strips are negociated with value D+2.
OLOs (Linear Bonds) > Outstanding amount of strips (PO + BE-strips) (billion EUR)
OLOs (Linear Bonds) > Nominal amount stripped and reconstituted (million EUR)
|Maturity Date||Coupon||ISIN Code||Nr||Net available
|Buy-backs in portfolio
by stripping (EUR)
|28/09/2020||3.75||BE0000318270||58*||16 652 000 000.00||2 834 000 000.00||18 466 077.26||0.11%|
|28/09/2021||4.25||BE0000321308||61||16 244 000 000.00||701 000 000.00||16 681 055.16||0.10%|
|28/03/2022||4.00||BE0000308172||48||13 999 000 000.00||85 000 000.00|
|28/09/2022||4.25||BE0000325341||65||15 929 000 000.00||317 000 000.00||19 500 000.00||0.12%|
|22/06/2023||2.25||BE0000328378||68||13 115 000 000.00||537 000 000.00|
|22/10/2023||0.20||BE0000339482||79||9 502 000 000.00||-|
|22/06/2024||2.60||BE0000332412||72||15 015 000 000.00||870 000 000.00|
|22/10/2024||0.50||BE0000342510||82||12 804 000 000.00||-|
|22/06/2025||0.80||BE0000334434||74||15 943 000 000.00||509 000 000.00|
|28/03/2026||4.50||BE0000324336||64||10 708 000 000.00||-|
|22/06/2026||1.00||BE0000337460||77||15 404 000 000.00||-|
|22/06/2027||0.80||BE0000341504||81||13 728 000 000.00||-|
|22/10/2027||0.00||BE0000351602||91||8 000 000 000.00||-|
|28/03/2028||5.50||BE0000291972||31||19 344 939 136.01||-||2 028 259 160.62||10.48%|
|22/06/2028||0.80||BE0000345547||85||14 724 000 000.00||-|
|22/06/2029||0.90||BE0000347568||87||15 349 000 000.00||-|
|22/06/2030||0.10||BE0000349580||89||9 968 000 000.00||-|
|22/06/2031||1.00||BE0000335449||75||13 607 000 000.00||-|
|28/03/2032||4.00||BE0000326356||66||8 204 000 000.00||-||270 773 682.51||3.30%|
|22/04/2033||1.25||BE0000346552||86||7 481 000 000.00||-|
|22/06/2034||3.00||BE0000333428||73||7 784 000 000.00||-|
|28/03/2035||5.00||BE0000304130||44||19 604 692 800.00||30 000 000.00||2 670 552 029.81||13.62%|
|22/06/2037||1.45||BE0000344532||84||4 904 000 000.00||-|
|22/06/2038||1.90||BE0000336454||76||8 587 000 000.00||-||169 800 000.00||1.98%|
|22/06/2040||0.40||BE0000350596||90||5 000 000 000.00||-|
|28/03/2041||4.25||BE0000320292||60||17 299 000 000.00||-||2 491 123 381.30||14.40%|
|22/06/2045||3.75||BE0000331406||71||9 737 000 000.00||-||442 200 000.00||4.54%|
|22/06/2047||1.60||BE0000338476||78||11 064 000 000.00||-||120 100 000.00||1.09%|
|22/06/2050||1.70||BE0000348574||88||7 411 000 000.00||-||54 800 000.00||0.74%|
|22/06/2057||2.25||BE0000343526||83||6 103 000 000.00||-||978 300 000.00||16.03%|
|22/06/2066||2.15||BE0000340498||80||6 649 000 000.00||-||991 650 000.00||14.91%|
|369 863 631 936.01||5 883 000 000.00||10 272 205 386.66||2.78%|
* Buy-back possible
** Available in the market (Issued amount less buybacks)
WHAT IS A REPO FACILITY?
- In order to guarantee the availability of securities, the Belgian Treasury has created a repo facility for its primary dealers. This measure aims to ensure a good functioning secondary market of OLOs and Treasury certificates.
- If there is a delivery problem, then the Treasury provides for the missing securities via a repo transaction concluded for one business day renewable for a maximum of 20 business days.
WHAT ARE THE CONDITIONS ?
- The Treasury has determined the maximum amounts available, depending on the lines and securities concerned. Each dealer has a right to a maximum amount of EUR 500 million for OLOs and Treasury certificates together.
- The repo rate is Eonia minus a spread.
- All requests for use of the repo facility should be addressed to the Treasury before 2.30 PM.