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The European Commission has issued the first bonds to raise funds for the Next Generation

June 16, 2021

Yesterday the European Commission issued the first bonds to raise funds for the Next Generation: €20 billion was raised on the market through a ten-year bond, maturing on July 4, 2031. This is the largest institutional bond issue in Europe, the largest single-tranche institutional transaction, and the largest amount raised by the EU in a single transaction, the Commission said.

BNP Paribas, DZ Bank, HSBC, Morgan Stanley, IMI-Intesa Sanpaolo were the five joint lead managers of the placement. Danske Bank and Santander were co-lead managers.

Ten of the 39 large banks initially selected by Brussels as primary dealers were temporarily excluded from the start of the placement. These are institutions that have violated EU antitrust rules and that for this reason "will not be invited to bid for individually syndicated transactions," a spokesman of the European Commission explained. "The Commission - the spokesman added - applies a rigorous approach to ensure that the institutions it works with are worthy of being counterparts of the European Union". Institutions that have violated antitrust rules will need to demonstrate that they have put corrective measures in place to ensure that irregularities cannot happen again before they can participate in the placement of the securities. Among the excluded banks there is also the Italian UniCredit. The others are JP Morgan, Citigroup, Bank of America, Barclays, Natixis, Nomura, NatWest, Deutsche Bank, and Credit Agricole.

The new ten-year Eurobond does not pay a coupon and has a yield of 0.086%, with a spread of -2 basis points concerning the mid-swap, equal to 32.3 basis points concerning the Bund expiring in February 2031. 142 billion euros, which means that the loan has been underwritten over seven times.

Two other similar issues are planned for July. The auctions for short-term bonds are expected in September, budget commissioner Johannes Hahn confirmed .

"The demand was seven times higher than the supply, we managed to get rates below 0.1%," explained the President of the European Commission, Ursula von der Leyen. "Today is a truly historic day for our European Union. We have successfully conducted the first fundraising operation for Next Generation EU," the President of the European Commission. "As a strong Union, we are raising funds in the markets together and investing in a common recovery from this crisis. It is an investment in our single market. And even more important is an investment in the future of the next generations of Europe as they face challenges of digitalization and climate change,» she explained. "Money can now start flowing to help reshape our continent, to build a greener, more digital, and more resilient Europe. Now I will visit all member states to see the impact of the Next Generation. Eu on the field ", Ursula von der Leyen added.
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