Brussels: Europe and the Arabs
The European Commission raised 9 billion euros of European Union bonds in its seventh joint deal for the year 2024. According to a statement issued by the Commission’s headquarters in Brussels, the double-tranche deal relates to new bonds worth 5 billion euros due on October 5, 2029, and 4 billion euros of EU bonds due. On October 5, 2054. The 5-year bond came with a reoffer yield of 2.952%, equivalent to a price of 99.640%, while the price of the 30-year bond reached 96.418%, with a reoffer yield of 3.751%. Bids received exceeded €66 billion on 5-year bonds and over €80 billion on 30-year bonds. This equates to oversubscription rates of approximately 13 times and 20 times, respectively.
The proceeds from the transaction will be used to finance EU policy programs (most notably in the context of NextGenerationEU and support for Ukraine).
The Commission has now released almost €9 billion of the €65 billion financing target for the second half of 2024. A full overview of all EU transactions carried out to date is available online. A detailed overview of EU transactions planned for the second half of 2024 is also available in the EU Finance Plan. The next deal on the EU indicative issuance calendar is the EU bond auction on 15 July 2024.
The statement said that the European Commission is authorized under the EU treaties to borrow from international capital markets on behalf of the European Union. It is an established name in the debt securities markets, with an impressive track record of bond issuances over the past 40 years. All issuances carried out by the European Commission are denominated exclusively in euros. 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.
The Commission uses the proceeds from bond issues to finance specific EU policy programmes. Among the prominent political programs currently being financed by EU borrowing is the NextGenerationEU recovery programme. The EU is also using bond issuance to finance up to €33 billion in loans to Ukraine under the Ukraine Facility between 2024 and 2027. The Ukraine Facility provides stable financial support for Ukraine's recovery, reconstruction and reforms on the path to EU accession.
In January 2023, the EU launched the Single Funding Approach, extending the diversified financing strategy first established for NextGenerationEU to include all other policy programs financed by EU loans. After introducing this approach, the European Union financed its various policy programs by issuing single-branded EU bonds rather than bonds with separate brands for individual programmes.
Through today's deal, the EU has now issued bonds worth €375 billion under the single financing approach. Of the proceeds raised, approximately €235 billion were disbursed to Member States under the Recovery and Resilience Facility. An additional €59 billion has been allocated to other EU programs that benefit from NextGenerationEU funding. In addition, more than €8 billion were disbursed to Ukraine under the Ukraine Facility in 2024, complementing the €18 billion disbursed to Ukraine under the Macro Financial Assistance Policy+ in 2023. Because the Commission is involved in short-term liquidity management operations to facilitate needs For future financing, the amounts raised will not necessarily be equal to the amounts disbursed. Total outstanding EU debt now stands at €543 billion, of which around €20 billion is in EU bonds.
To finance EU policies as efficiently and effectively as possible, Commission issuances are structured through semi-annual financing plans and pre-announced issuance windows. To support secondary market liquidity for EU bonds, the Commission introduced a framework to incentivize EU primary dealers to bid for EU securities on electronic platforms in November 2023. In addition, the Commission will support the use of EU bonds in repurchase agreements by offering facilities Buyback later in 2024.