European Commission successfully places first EU SURE bond in 2021

This article is brought to you in association with the European Commission.

The European Commission has issued a €14 billion social bond under the EU SURE instrument to help protect jobs and people in work. The issuing consisted of two bonds, with €10 billion due for repayment in June 2028 and €4 billion due for repayment in November 2050. There was high demand among investors, which once again enabled the Commission to obtain very good pricing conditions. These are being passed on directly to the EU Member States.

Commissioner Johannes Hahn in charge of Budget and Human Resources said: “Today’s issuance of SURE bonds is the continuation of a remarkable success story. This issuance has shown again the market’s great interest in EU bonds. This is great news for the EU as an issuer. It gives us confidence that we will successfully complete the SURE issuance and launch the NextGenerationEU borrowing and lending programme.”

The 7-year bond was priced at a negative yield of -0.497%. This means that for every €105 that Member States get, they pay back €100 when the bond matures. This negative interest rate advantage is therefore passed on straight to the Member States receiving the loans in the form of back-to-back lending. The 30-year bond was priced on the slightly positive territory, at 0.134%, which is an excellent result for this maturity. (See here for more details on the pricing of the transaction).

This has been the fourth bond issuance under the EU SURE programme. So far and thanks to the first three issuances between late-October and end-November last year, 15 EU Member States received nearly €40 billion in back-to-back loans under SURE.

Throughout 2021, the Commission will seek to raise a further €35 billion through issuance of EU SURE bonds.

Later this year, the Commission is due to also launch the borrowing under NextGenerationEU, the recovery instrument of €750 billion (in 2018 prices) later this year to help build a greener, more digital and more resilient Europe.

Background

The Council has approved a total of €90.3 billion in financial support to 18 Member States under SURE. In 2020, the Commission disbursed a total of €39.5 billion to 15 EU Member States: Italy, Spain, Poland, Greece, Croatia, Lithuania, Cyprus, Slovenia, Malta, Latvia, Belgium, Romania, Hungary, Portugal and Slovakia, following three EU SURE issuances.

The 2020 amounts were raised in three operations, carried out on 20 October 2020, 10 November 2020 and 24 November 2020. All the bonds issued under SURE were largely oversubscribed – between 11.5 and 13 times, resulting in very favourable pricing terms.

The bonds issued by the EU under SURE benefit from a social bond label. This provides investors with confidence that the funds mobilised will serve a truly social objective.

The funds raised are being transferred to the beneficiary Member States in the form of loans to help them cover the costs directly related to the financing of national short-time work schemes and similar measures as a response to the pandemic.