Eurobonds avalanche: requests for 166 billion for common debt

An avalanche of applications also for Eurobonds. The European Commission follows in the footsteps of the Italian Treasury and places bonds for EUR 11bn in its ninth syndicated deal for 2024, obtaining for the two tranches of 3- and 15-year bonds requests for around EUR 166bn. With this transaction - the proceeds of which will be used to finance EU policy programmes, in particular in the context of the NextGenerationEU programme and support for Ukraine - the Commission has thus issued around EUR 44 billion of its funding target of EUR 65 billion for the second half of 2024.

In detail, the transaction was handled by Barclays, Bnp Paribas, Goldman Sachs, Lbbw and Nordea as joint lead managers, as well as Danske, Intesa Sanpaolo, Kbc, Mps, Natixis and Santander as co-leaders, covered an issue maturing in December 2027 for EUR 5 billion at a gross rate of 2.506 per cent and one maturing in October 2039 for a further EUR 6 billion at 3.227 per cent. The two tranches were subscribed for 81 and 85 billion respectively, i.e. 16 and 14 times the allotted amount.

With regard to yields, the EU was able to squeeze out a spread of 44.9 basis points over the corresponding German Bund and 3.3 points over the French OaT in the case of the 3-year bond and 72.1 and 1.9 points for the 15-year bonds. Brusselsbased bonds had underperformed German bonds last month, also suffering from the weakness affecting French bonds. "The market mood," points out Elena Moalli, strategist at Intesa Sanpaolo, however, "changed after Bloomberg announced a consultation on the inclusion of EU bonds in its government bond indices.

The previous day, the EU launched a repurchase agreement (Repo) mechanism, the introduction of which aims to reinforce the role of Eurobonds as liquid and safe collateral and was made necessary by the exponential growth of EU bond trading on the secondary market in recent years. "This operation will improve market liquidity," Moalli admits, "although it is unlikely to have an impact on spreads.

With the latest placement, the EU has now issued €410 billion in Eurobonds as part of the unified financing approach. Of the proceeds raised, almost EUR 260bn has been disbursed to Member States under the NRP. A further 64 billion were allocated to other EU programmes benefiting from NextGenerationEU funding. Finally, more than 10 billion has been disbursed so far this year to Ukraine under the plan that will finance up to 33 billion between 2024 and 2027. Thetotal EU debt currently amounts to about EUR 577 billion, of which about EUR 20 billion is in the form of Eu Bills, short-term securities similar to our BoTs.