This article is brought to you in association with the European Commission.
In its first bond syndication of 2022, the European Commission has today raised a further €5 billion in NextGenerationEU funds on behalf of the EU in yet another successful deal. Due on 6 July 2051, the 30-year bond – executed as an increase to an existing EU-Bond – brings the total financing raised under the programme to €78.5 billion. The Commission’s successful placement will help sustain the momentum behind Europe’s recovery from the COVID-19 pandemic.
The bond was nearly 13 times oversubscribed, achieving a total order book of €64.1 billion. This strong demand enabled the Commission to place the bond under very good pricing conditions in a sign of the strong confidence of investors in the NextGenerationEU programme.
The Commission complemented this issuance with a further €2.2 billion, 5-year bond to fund back-to-back loans to Portugal under the European Financial Stability Mechanism (EFSM).
Commissioner for Budget and Administration, Johannes Hahn, said: “Today’s deal reflects the strength of the EU as an issuer. We executed a benchmark transaction on advantageous terms which is an excellent result. On this basis, the Commission will continue supporting Member States in their efforts to soften the blow of the pandemic and rebuild their economies on a more digital and sustainable foundation.”
Using funds already raised under NextGenerationEU, the Commission has financed some €67 billion in Recovery and Resilience Facility payments to a number of Member States. As of end-December 2021, over €7 billion has further been allocated in support of other EU programmes key to Europe’s successful navigation of the digital and green transitions.
Today’s deal is the sixth syndicated transaction the Commission has executed under NextGenerationEU. Added to the €2.5 billion raised for the programme via bond auction in January, the deal takes the Commission to €7.5 billion of its €50 billion funding target for the first six months of 2022.
As laid out in its issuance calendar for the first half of the year, the Commission intends to execute a further four syndicated transactions between March and June 2022. Syndicated transactions will be complemented by further monthly EU-bond auctions. Short-term funding will also continue to be raised in two EU-bills auctions per month, giving the Commission additional flexibility to meet its payment needs.
Background
NextGenerationEU is a temporary instrument bringing more than €800 billion in support to Europe’s recovery from the coronavirus pandemic and building a greener, more digital and more resilient Europe.
To finance NextGenerationEU, the Commission will borrow around €800 billion in current prices on capital markets by the end of 2026. Of this total, €723.8 billion will be made available under the Recovery and Resilience Facility. An additional €83.1 billion will support key EU programmes.
To raise the necessary funding under the best possible market conditions, the Commission is implementing a diversified funding strategy. This strategy combines the use of different funding techniques with an open and transparent communication to market participants. This facilitates the market’s absorption of the funding programme while at the same time giving the Commission the ability to react quickly to any market turbulence.
Technical section
| 1st NextGenerationEU bond syndication for 2022 The 30-year bond carries a coupon of 0.7% and came at a re-offer yield of 1.021% providing a spread of 29 bps to mid-swaps, which is equivalent to 61.5 bps over the 30year Bund due in August 2050 and to -10.6 bps over the 30-year OAT due in May 2050. The final order book was of €64.1 billion, which meant that the bond has been almost 13 times oversubscribed. EFSM bond The 5-year bond carries a coupon of 0.25% and came at a re-offer yield of 0.31% providing a spread of -23 bps to mid-swaps, which is equivalent to 32.5 bps over the 5 year Bund due in October 2026 and to 16.0 bps over the 5-year OAT due in May 2026. The final order book was of €19.2 billion, which meant that the bond has been over 8 times oversubscribed. The joint lead managers of this transaction were Citi, J.P. Morgan, Nordea, Société Générale and UniCredit. |
Investors’ profile *
1st NextGenerationEU bond syndication for 2022
By Geography:
| % Total | |
| Germany | 31% |
| France | 7% |
| UK | 13% |
| Switzerland | 4% |
| Benelux | 10% |
| Nordics | 13% |
| Italy | 7% |
| Other Europe | 13% |
| Rest of World | 2% |
| TOTAL | 100% |
By Investor Type:
| % Total | |
| Central Banks / Official Institutions | 30% |
| Fund Managers | 29% |
| Insurance and Pension Funds | 13% |
| Bank Treasuries | 22% |
| Banks | 4% |
| Hedge Funds | 2% |
| 100% |
EFSM bond
By Geography:
| % Total | |
| Germany | 7% |
| France | 5% |
| UK | 5% |
| Switzerland | 22% |
| Benelux | 5% |
| Nordics | 13% |
| Italy | 3% |
| Other Europe | 4% |
| Asia | 30% |
| Rest of World | 6% |
| 100% |
By Investor Type:
| % Total | |
| Central Banks / Official Institutions | 66% |
| Fund Managers | 19% |
| Bank Treasuries | 11% |
| Banks | 3% |
| Hedge Funds | 1% |
| 100% |
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