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European Commission Raises a Further €4 Billion With Record Over-Subscription in its 8th EU-Bonds Syndication for 2023

The European Commission, which issues EU-Bonds on behalf of the EU, has today successfully completed its 8th syndicated transaction since the beginning of the year, raising a total of €4 billion. The single tranche transaction consisted of a tap of EU’s 30-year bond due on 4 October 2052. The transaction was the first under the funding plan for the second half of 2023, a period over which the Commission intends to raise €40 billion in long-term funding.

Investor demand for EU-Bonds was extremely strong, with the transaction drawing bids of over €73 billion overall, making for an oversubscription rate of over 18 times – the highest recorded in an EU syndication.

The proceeds of this transaction will be used for the NextGenerationEU recovery programme and the Macro-Financial Assistance+ programme for Ukraine, in line with the Commission’s approach of issuing single branded “EU-Bonds” rather than separately labelled bonds for individual programmes.

A full overview of all transactions the Commission has executed to date is available online. A detailed overview of the EU’s planned transactions for the second half of 2023 is also available in the EU funding plan.  

Background

The European Commission is borrowing on international capital markets on behalf of the European Union and disbursing the funds to Member States and third countries under various borrowing programmes. EU borrowing is guaranteed by the EU budget, with contributions to the EU budget being an unconditional legal obligation of all Member States under the Treaties.

Since January 2023, the European Commission has been issuing single branded EU-Bonds rather than separately labelled bonds for individual programmes. The proceeds of these single-branded bonds are allocated to relevant programmes according to the procedures set out in the applicable agreements.

On the basis of EU-Bonds raised since mid-2021, the Commission has so far disbursed €153.36 billion in grants and loans to the EU Member States under the Recovery and Resilience Facility, on top of further support to other EU programmes benefitting from NextGenerationEU funding.

The Commission has also disbursed €9 billion to Ukraine under the Macro-Financial Assistance + programme, with a further disbursement of €1.5 billion scheduled later in July 2023. This programme – which will deliver €18 billion in support over the whole of 2023 – follows the disbursement of €7.2 billion by the Commission in emergency MFA loans to Ukraine in 2022. Prior to that, the EU had provided over €5 billion to Ukraine through five MFA programmes since 2014.

Under the Macro-Financial Assistance (MFA) programme, the EU provides medium/long-term loans or grants, or a combination of these, to partner countries experiencing a balance of payments crisis. MFA beneficiaries include Albania, Bosnia-Herzegovina, GeorgiaJordan, Kosovo, Moldova, Montenegro, North Macedonia, TunisiaUkraine.

To further boost secondary market liquidity of EU-Bonds, the Commission is preparing a framework for providing investors with pricing quotes on electronic platforms for EU securities (to be implemented by Q4 2023) and is starting to build a facility to support the use of EU-Bonds as an instrument for repurchase agreements (to be implemented by mid-2024).

Today’s bond syndication
30-year tap
Due on 4 October 2052, this bond carries a coupon of 2.5% and came at a re-offer yield of 3.422% equivalent to a reoffer price of 83.131%. The spread to mid-swap is +66 bps, which is equivalent to +87 bps over the Bund due on 15 August 2052 and +1.8 bps over the OAT due in 25 May 2052.The final order book was of over € 73 billion.The joint lead managers of this transaction were Barclays, BNP Paribas, Citi, LBBW and NatWest.

Source : European Commission

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