Belgium, the small European country best known for being the home of the EU’s capital Brussels, could be the first sovereign default to happen in Europe.
But wait…Belgium begins with a ‘B’ and that letter isn’t found anywhere in the PIIGS. The country has a debt problem like the other distressed European states, but it has a somewhat more significant and imminent concern: potential breakup.
The largest party in the country’s dutch speaking north, an area called Flanders, is a Flemish nationalist party. And the south is populated by a French speaking population that is a net beneficiary of state aid.
Now CDS on the country’s sovereign debt is blowing out as markets price in the possibility that a member of the eurozone and EU could be on the brink of breaking up.
Here’s Gavin Nolan from Markit on the country’s recent bond sale activity (emphasis ours):
Belgium’s T-bill auction this morning was less impressive. The lowlands country sold EUR2.81 billion, below the top- end of its EUR2.5-EUR3 billion indicative range. The bid-to-cover ratio on its three-month bill was a solid 4.54, though this was less than the 6.57 achieved a few weeks ago. The 2.12 b/c on the six-month bill was more or less in line with the previous auction.