NextGenerationEU: Fourth bond issuance maintains strong momentum for EU borrowing for recovery

(Credit: Unsplash)

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


The European Commission has today raised a further €9 billion to support Europe’s recovery from the coronavirus crisis and its consequences, through the fourth NextGenerationEU bond issuance since the start of the programme in mid-June. The European Commission issued a 7-year bond due on 04 October 2028. The bond was largely oversubscribed – over 11 times, with books exceeding €103 billion.

The strong demand confirms the ongoing interest by investors in EU securities, which enabled the Commission to place the bonds under very favourable pricing conditions, fully in line with the remarkable performance of the NextGenerationEU programme so far.

Commissioner in charge of Budget and Administration, Johannes Hahn, said: ”With the fourth transaction under NextGenerationEU, we have built on the success of the initial deals. This transaction allows the Commission to maintain a steady flow of funding to our Member States, to support the recovery and help rebuild a greener, more digital and more resilient Europe.

This is the fourth transaction under the NextGenerationEU programme, following the €20 billion 10-year bond that the Commission issued on 15 June 2021; the dual-tranche transaction of €15 billion from 29 June 2021 – that consisted of a €9 billion 5-year bond and a €6 billion 30-year bond, and the €10 billion 20-year bond issued on 13 July 2021.

Following today’s transaction, the Commission has so far raised €54 billion under NextGenerationEU.

On that basis, the Commission has already made the first payments to a number of Member States under the Recovery and Resilience Facility and other EU budget programmes.

In the course of 2021, the Commission expects to raise some €80 billion in bonds, to be complemented by short-term EU-Bills, as announced in the funding plan published in June 2021 and updated in September 2021.

The Commission will issue EU-Bills exclusively via its new auction platform. The first EU-Bills auction is planned to take place on 15 September 2021.

As announced earlier this month in its detailed issuance calendar for 2021, the Commission will hold two more syndicated transactions by the end of the year, in October and November. Following the release of the NextGenerationEU Green Bond Framework earlier in September, the Commission is preparing to issue the first NextGenerationEU Green Bond. Once completed, the NextGenerationEU green bond programme will turn the EU into the world’s biggest green bond issuer.

Background

NextGenerationEU is a temporary recovery instrument of more than €800 billion in current prices to support Europe’s recovery from the coronavirus pandemic and help build a greener, more digital and more resilient Europe.

To finance NextGenerationEU, the European Commission – on behalf of the EU – will raise from the capital markets  around €800 billion between now and end-2026. €421.1 billion will be available mostly for grants (under the Recovery and Resilience Facility and other EU budget programmes); €385.8 billion for loans. This will translate into borrowing volumes of an average of roughly €150 billion per year.

To raise the necessary funding under the best possible market conditions, the Commission has started to implement a diversified funding strategy.

This strategy relies on a mix of long- and short-term issuances via syndicated and auction formats to enable the Commission to raise funds flexibly and on the most advantageous terms under prevailing market conditions.

Technical section

Fourth NextGenerationEU bond issuance The 7-year bond carries a coupon of 0.00% and came at a re-offer yield of -0.28% providing a spread of -14 bps to mid-swaps, which is equivalent to +20.8 bps over the 7-year Bund due in November 2028 and to +0.9 bps over the 7-year OAT due in November 2028. The final order book was of over €103 billion, which meant that the bond has been almost 11 times oversubscribed. This transaction therefore marks the largest order book size for a sub 10-year deal to date across both NextGenerationEU and SURE programmes. The joint lead managers of this transaction were Goldman Sachs Bank Europe SE, Landesbank Baden-Württemberg (LBBW), Morgan Stanley Europe SE, NatWest Markets N.V. and Société Générale S.A.

Investors’ profile *

By Geography

UK39%
Benelux11%
Nordics10%
France8%
Asia7%
Germany7%
Italy6%
Other Europe6%
Spain/Portugal4%
Rest of World2%
TOTAL100%

By Investor Type

Fund Managers36%
Central Banks / Official Institutions32%
Bank Treasuries21%
Insurance and Pension Funds7%
Banks2%
Hedge Funds2%
TOTAL100%

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Why precision medicine won’t transform healthcare – but governance could

Czech PM should resolve his conflict of interest as a matter of urgency say MEPs

One is not born, but rather becomes, a woman

The global economy is woefully unprepared for biological threats. This is what we need to do

Daughter of 2019 Sakharov Prize winner Ilham Tohti receives prize on his behalf

Perspective on the policy of disinformation in the face of the COVID-19 pandemic

State aid: Commission approves €1.25 billion German measure to recapitalise TUI

The challenges of Chinese investment in Latin America

Commission introduces surveillance of imports of bioethanol, and remains open to examining requests from other sectors

Mergers: Commission approves acquisition of joint control over Prosegur Alarmas by Telefónica and Prosegur

Climate change takes toll on Zimbabwe’s natural habitat, UN deputy chief observes

Fight against gender inequality in medicine: Brazilian women physians working at the frontline of COVID-19

When connectivity is not enough: the key to meaningful digital inclusion

State aid: Commission approves €300 million public support for the development of ultrafast broadband network in Greece

Banks can achieve net-zero pledge by 2050. Here’s how

A guide to thriving in the post-COVID-19 workplace

‘Multiplicity’ of rights violations in Ukraine as fifth winter of conflict bites

Preparing for developing countries the ‘Greek cure’

Donald Tusk presents EU summit conclusions for last time

State aid: Commission approves €500 million Greek aid scheme to support uncovered fixed costs of companies affected by coronavirus outbreak

These are the world’s best universities for recycling and sustainability

Speeches of Vice Premier LIU He and Vice President of the European Commission Jyrki Katainen at the Press Conference of the Seventh China-EU High-level Economic and Trade Dialogue

IPCC reports devastating climate consequences; US in denial while EU does not fully support the 2050 net zero emissions target

YO!Fest back in Strasbourg for the 2nd edition of the European Youth Event – 20-21 May 2016

A Sting Exclusive: Young people are right about climate change; it’s time to listen

Beyond self-regulation: dealing with Europe’s consumption problem

Managing third-party risks? Here’s how a holistic approach can help

Activist investors are more powerful than ever. Here’s what that means for the economy

Satellites and data are going to help us phase out fossil fuels. Here’s how

The importance and the need of mobile technology in the health care system and in saving lives.

The economic effects of the COVID-19 coronavirus around the world

Schengen: new rules for temporary checks at national borders

Brexit: the time has come to back the withdrawal deal

A new era of computing is coming. How can we make sure it is sustainable?

The three sins the EU committed in 2015

Antimicrobial resistance: how can an intersectoral approach between society and healthcare professionals be developed and applied?

Why we need artists who strive for social change

Here are three ways Africa’s youth are defeating corruption

AI technologies must prevent discrimination and protect diversity

Gender equality: an issue much talked about but less acted upon

Economic Outlook: Weak trade and investment threaten long-term growth

Tuberculosis infections declining, but not fast enough among poor, marginalised: UN health agency

US-China trade war: Washington now wants control of the renminbi-yuan

COVID-19 Therapeutics Strategy: Commission identifies five promising candidate therapeutics

Business is a crucial partner in solving the mental health challenge

Tech must embrace teamwork to transform the world

UN experts urge United Arab Emirates to release terminally ill woman to live her last days ‘in dignity’

The mental domain in times of a pandemic

UN food agency begins ‘last resort’ partial withdrawal of aid to opposition-held Yemeni capital

Don’t compare data to oil – digitization needs a new mindset

How TV has brought mental health issues into the light – and helped to banish stigma

IMF: European banks do not perform their duty to real economy

De Gucht: More gaffes with the talks on the EU-US free trade agreement

Innovations in reusable packaging need a playbook. Here’s why

What the world will look like after the Iran and 5+1 deal; the US emerges as major power broker in Middle East

Climate change will never be combatted by EU alone while some G20 countries keep procrastinating

How India’s new consumers can contribute to a $6 trillion opportunity

How data residency laws can harm privacy, commerce and innovation – and do little for national security

Sustainable Development Goals: making the world a better place

Europe votes against GMOs but the Council votes for TTIP

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: