Brussels, 10 September 2024
The European Commission has today raised €10 billion of EU-Bonds in its 8th syndicated transaction for 2024, €5 billion of which in the form of NextGenerationEU (NGEU) Green Bonds.
The dual-tranche transaction concerned a new €5 billion bond due on 4 December 2031, and a €5 billion tap of the NGEU Green Bond maturing on 4 February 2050. The 7-year bond came at a re-offer yield of 2.604%, equivalent to a price of 99.329%, while the 25-year bond was priced 99.788%, with a re-offer yield of 3.262%. Bids received were in excess of €54 billion on the 7-year bond and in excess of €77 billion on the 25-year bond. This equals oversubscription rates of approximately 11-times and 15-times, respectively.
The proceeds of the transaction will be used to finance EU policy programmes as well as green projects in Member States’ national Recovery and Resilience plans (RRPs) – the roadmaps to spending under NGEU. All NGEU Green Bond issuances are guided by the NGEU Green Bond Framework.
Today’s bond syndication
7-year line
Due on 4 December 2031, this bond carries a coupon of 2.500% and came at a re-offer yield of 2.604 %, equivalent to a price of 99.329 %. The spread to mid-swap is 24 bps, which is equivalent to 62 bps over the Bund due on 15 August 2031 and 2.5 bps through the OAT due on 25 November 2031.
The final order book was of over €54 billion.
25-year NGEU Green Bond tap
Due on 4 February 2050, this bond carries a coupon of 3.250% and came at a re-offer yield of 3.262 %, equivalent to a price of 99.788 %. The spread to mid-swap is 90 bps, which is equivalent to 84 bps over the green Bund due on 15 August 2050 and about 8 bps through the green OAT due on 25 June 2049.
The final order book was of over €77 billion.
The joint lead managers of this transaction were Citi, Deutsche Bank, JP Morgan, Société Générale and Unicredit.
The Commission has now issued approximately €28 billion of its €65 billion funding target for the second half of 2024. A full overview of all EU transactions executed to date is available online. A detailed overview of the EU’s planned transactions for the second half of 2024 is also available in the EU funding plan. The next transaction in the EU’s indicative issuance calendar is an EU-Bond auction on 23 September 2024.
Background
The European Commission is empowered by the EU Treaties to borrow from the international capital markets on behalf of the European Union to finance selected EU policy programmes. It is a well-established name in debt securities markets, with a track record of bond issuances over the past 40 years. All issuances executed by the European Commission are denominated exclusively in euro. All EU borrowing is guaranteed by the EU budget, and contributions to the EU budget are an unconditional legal obligation of all Member States under the EU Treaties.
Since January 2023, the EU funds its different policy programmes by issuing single-branded EU-Bonds rather than separately labelled bonds for individual programmes. This follows the creation of a unified funding approach, extending the diversified funding strategy first established in 2021 for NGEU to other policy programmes funded by EU borrowing.
To finance EU policies as efficiently and effectively as possible, the Commission’s issuances are structured by semi-annual funding plans and pre-announced issuance windows. In parallel, a framework incentivising EU Primary Dealers to provide quotes on EU securities on electronic platforms is in place since November 2023, while a new repurchase facility will be made available to EU Primary Dealers in early autumn 2024 to support the secondary market liquidity through the use of EU-Bonds in repurchase agreements.
The Commission is also publishing annual reports on the allocation and impact of NGEU green bond proceeds, with real time information about the eligible and reported green bond expenditure available in the NGEU Green Bond Dashboard here: Dashboard – European Commission (europa.eu).
With today’s transaction, the EU has now issued €394 billion in EU-Bonds under the unified funding approach, with more than €65 billion in the form of NGEU Green Bonds. Of the proceeds raised, almost €260 billion has been disbursed to Member States under the NGEU Recovery and Resilience Facility. A further €62 billion has been allocated to other EU programmes benefitting from NGEU funding. In addition, over €10 billion has been disbursed to Ukraine in 2024 so far under the Ukraine Facility that will finance up to €33 billion in loans to Ukraine between 2024 and 2027. This support complements the €18 billion disbursed to Ukraine under the Macro-financial Assistance+ policy in 2023.
The EU’s total debt outstanding now stands at about €560 billion, of which around €19 billion in the form of EU Bills.
Information on the allocation on the investors in this transaction is available in the transactions section of the EU as a borrower website. More information on EU’s issuance activities is available here: The EU as a borrower – investor relations – European Commission (europa.eu)
Source – EU Commission