European Commission settles first transaction via new Eurosystem based EU Issuance Service

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

The European Commission, which issues debt securities on behalf of the EU and Euratom, has today raised a further €2.2 billion of short-term EU-Bills in its first bill auction of the year. The dual tranche transaction consisted of a new €1.3 billion, 6-month bill due in July 2024 and a €0.9 billion tap of the 3-month bill due in April 2024.

The auction was the EU’s first debt transaction that uses the purpose-built EU Issuance Service (EIS) for post-trade settlement. The securities issued in today’s 6-month Bill auction will be registered with the National Bank of Belgium, which will serve as the Central Securities Depositary (CSD) for all EU-Bonds and Bills newly issued after 1 January 2024. The European Central Bank (ECB) will act as paying agent for the EU in respect of all payment flows arising from these transactions. More information on these roles is available in the EIS factsheet.

The launch of EIS, by aligning the settlement infrastructure for EU debt securities with those of large EU (sovereign) issuers which benefit from the support of national central banks as fiscal agents will help sustain the best borrowing conditions for EU-issued securities. It also creates a level playing field for all CSDs and investors that trade EU-issued bonds. The EIS also offers direct settlement of EU Bills and Bonds in TARGET2-Securities (T2S) and facilitates the use of EU debt securities as collateral by counterparties with Central Banks.

The introduction of the EIS follows the launch of quoting arrangements on electronic trading platforms in late 2023 and marks the latest step in the development of the EU as one of the largest issuers of euro-denominated securities.

The EIS will be used for the settlement of all new EU debt securities (i.e., new ISINs for EU-Bonds and EU-Bills) issued by the European Union and Euratom. EU debt securities first issued prior to January 2024 will continue to follow the post-trade settlement arrangements the Commission had in place before the introduction of the EIS, where Clearstream Luxembourg serves as CSD and BNP Paribas Luxembourg serves as settlement bank. Thus, the legacy and EIS settlement systems will co-exist.

Today’s auction forms part of the Commission’s regular EU-Bills issuance programme. A full overview of all EU transactions executed to date is available online. A full overview of the EU’s funding programme for H1 2024 is also available in the EU’s H1 2024 funding plan.

Background

The Commission borrows on international capital markets on behalf of the EU and Euratom and disburses the funds to EU Member States and third countries under various borrowing programmes. 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.

As of January 2024, all new EU and Euratom debt securities are to be issued via the EIS. The EIS is a new infrastructure for the settlement of primary market issuances and initial distribution of EU debt securities. The EIS offers direct settlement of EU-Bills and EU-Bonds in TARGET2-Securities (T2S) and a level playing field for all (I)CSDs and investors that trade EU-issued bonds.

Under the EIS, the Commission will deposit EU debt securities with the National Bank of Belgium who plays the role of Issuer-CSD using the National Bank of Belgium Securities Settlement System (NBB-SSS). Only (I)CSDs other than NBB-SSS can act as Investor CSD and will be able to hold EU or Euratom debt in their securities accounts directly at NBB-SSS. Any interested EU (I)CSD wanting to become an Investor CSD can on-board to NBB-SSS in a non-discriminatory manner.

The participants of Investor (I)CSDs connected to T2S can settle primary and secondary market transactions directly in T2S. The participants of Investor (I)CSDs not connected to T2S are able to settle primary and secondary markets transactions outside T2S via their CSDs (acting as CSD participants in NBB-SSS).

End-Investors can keep EU debt securities directly on securities accounts with investor (I)CSDs or indirectly via security accounts provided by financial institutions, as is the case today.

As the paying agent for issuances of the EU and Euratom, the ECB provides the T2S cash account from which NBB-SSS transfers payments to/from the Investor-CSDs.

More information

The EU as a borrower

Memorandum of Understanding for the EIS

Quote(s)

Today’s Bill auction is the first to be settled via our new purpose-built and Eurosystem anchored EIS. It therefore represents another landmark moment in the development of the EU as one of largest issuers of euro-denominated securities. The EIS brings the EU’s settlement processes into line with the largest EU sovereign issuers and will create a more level playing field for investors trading EU debt securities. It also represents another example of the excellent partnership between the European Commission, the European Central Bank and other national and EU official sector institutions in building a successful EU debt issuance programme.

Johannes Hahn, Commissioner for Budget and Administration

The ECB, acting as fiscal and paying agent for the European Commission, welcomes the go-live of the EIS, marking a new era in the efficient and robust initial distribution and settlement of debt securities using TARGET2-Securities based on the Memorandum of Understanding for the EIS.

Isabel Schnabel, Executive Board Member of the European Central Bank

The excellent collaboration of the CSD of the National Bank of Belgium with the ECB and the EU Commission has been a great opportunity to demonstrate our expertise but also to contribute to a more integrated Capital Market Union. We are also proud to be part of the foundations that will support a better Europe through EU plans like NextGenerationEU.

Pierre Wunsch, Governor of the National Bank of Belgium