EU Raises EUR20 Billion in Inaugural 10-Year NextGenerationEU Bond
The EU raised 20 billion euros ($24.24 billion) in the inaugural issue of NextGenerationEU bonds on Tuesday in a step toward establishing itself as the largest supranational issuer.
Order books for the issue of 0% July 2031-dated bonds closed in excess of EUR142 billion, including EUR4 billion of joint lead manager demand, said one of the lead managers. The spread on the bond was set two basis points below mid-swaps, said the same bank. The bond was priced at 99.141, at a reoffer yield of 0.086%.
“The maturity choice and some concession likely helped support the deal, together with fundamental strength of the issuer,” said Peter Allen Goves, fixed-income research analyst at MFS Investment Management. “The strength of demand (noting the large order book) serves further to illustrate the interest in Aaa[-rated] assets offering a spread to Germany,” he said.
“This strong demand is justified by the interesting premium that the issue had versus others with similar risk,” said Filipe Silva, director of asset management at Banco Carregosa.
The NGEU issuance follows nearly EUR90 billion issuance in seven bond transactions in the course of seven months for SURE, the EU’s support program to mitigate unemployment related to the coronavirus pandemic. SURE bonds were issued in social bond format.
The EU plans to raise around EUR80 billion in long-term bonds in 2021 to finance the NGEU–the EU’s Recovery Fund–and further tens of billions of euros in bills. Two more syndicated transactions are expected before the end of July, while starting September, the EU will alternate syndicated issues with auctions. By the end of 2026, the EU plans to raise around EUR800 billion from investors for the NGEU, including up to EUR250 billion in green bonds.
“Along the way, the EU will also become the world’s largest green bond issuer and underpin its claim of sustainable transformation of the financial markets,” said Christian Kopf, head of fixed-income portfolio management at German asset manager Union Investment.
The strong demand for the bond “underlines the attractiveness of the EU as a safe haven on the capital market,” Mr. Kopf added.
“Given the size of the program, the EU looks set to grow in its market prominence within the high quality fixed income space,” MFS IM’s Mr. Goves said.
Joint lead managers of the issue were BNP Paribas, DZ Bank, HSBC, IMI-Intesa Sanpaolo and Morgan Stanley, with Danske Bank and Santander acting as co-lead managers.
Source: Dow Jones