The thriving market in Luxembourgfranc bond issues has been temporarily stalled by the Belgian
government crisis which has put the franc under pressure and
forced up interest rates, banking sources said.
    On Monday, King Baudouin accepted the resignation of
Belgian Prime Minister Wilfried Martens' coalition and asked
him to try to form a new government.
    Because of the crisis, Banque Generale du Luxembourg SA
(BGL) has delayed a public issue for one billion Luxembourg
francs, originally scheduled for the end of last week, BGL
director Robert Sharfe said.
    He said the issue would probably go ahead later this week.
    It is likely there will be an upward adjustment in interest
rates on Luxembourg franc bond private placements, banking
sources said. However, no new placements are scheduled for
another 10 days.
    The latest issue last Friday for Swedish Export Credit Corp
(SEK) carried a coupon of 7-1/2 pct, whereas in previous issues
the interest was set lower at 7-3/8 pct.
    Interest rates on the Luxembourg franc, which is in parity
with the Belgian franc, are strongly affected by Belgian rates.
    On Friday, Belgium increased the rate on three-month
Treasury certificates by 0.5 pct to 7.15 pct as the Belgian
franc came under pressure.
    Private placements in Luxembourg francs have become
increasingly popular, particularly with Scandivanian borrowers,
because they carry a relatively low interest rate.
    Private investors also have flocked to buy Luxembourg franc
bond issues because the franc was seen as a fairly strong
currency.
 REUTER
