EU raises another €9bn for Covid recovery

With the European Commission today set to hold the first auction of short-term EU-Bills to top up its bond issuance program, the executive branch of the EU said its latest oversubscribed bond had raised €9 billion, to take the money raised so far for Covid-recovery spending to €54 billion.

The EU wants to raise €80 billion in bonds this year, plus “tens of billions of euros” of short-term bills, with the first auction of the latter, syndicated lending opportunities due to take place today. ‘Syndications’ offer groups of lenders who are unable to sign up individually to provide the large sums of credit required, to do so collectively.

Yesterday’s €9 billion, seven-year bond issuance attracted offers for more than €103 billion of investment, with UK entities making up 39% of the successful subscribers, ahead of various European investors, and with 7% of the bonds issued to Asian backers and 2% to the rest of the world. Fund managers accounted for 36% of yesterday’s subscribers, with central banks contributing a further 32%, and the markets operations of banks 21%.

The cash will go towards the EU’s €800 billion ‘NextGenerationEU‘ Covid recovery package, which will run to the end of 2026 and include a €724 billion ‘recovery and resilience facility‘ (RRF) which will disburse grants and loans to member states who must agree to devote at least 37% of the windfall to green spending.

Latvia was latest EU member state to receive an advance payment of its RRF cash, with the commission announcing on Friday the Baltic state had banked an initial €237 million of its total €1.8 billion support package, all of which will be offered as non-repayable grants.

The commission’s bond program has thus far raised €54 billion. An initial, ten-year, €20 billion instrument was issued on June 15; followed by a €9 billion, five-year and €6 billion, 30-year investment on June 29; and a 20-year, €10 billion issuance on July 13.

The EU has pledged to issue 30% of its bonds under a ‘green’ label which commits their proceeds to be spent combating climate change, and last week said its first Covid-recovery green bond would be issued next month.