Brussels raises 20,000 million in its first issue for recovery funds

Interest remains at 0.1% with a demand seven times higher than what was placed. The plans of Spain and Portugal will be approved tomorrow by the Commission

The President of the European Commission, Ursula von der Leyen.

With a maximum credit rating and with the backing of 27 Member States and the European Commission, the first issuance to attract the money from the recovery funds has been an overwhelming success. In its first market launch, Brussels has been able to obtain 20,000 million euros with an interest of only 0.1%, with a demand seven times higher than what was obtained.

The demands, according to the data of Bloomberg, have exceeded 140,000 million for a bond at 10. The cost has been two basis points below the ‘midswap’ and its maturity is set on July 4, 2031, according to Europa Press. Banco Santander and Danske Bank They have been the leading managers of this first major operation, while BNP Paribas, DZ Bank, HSBC, Banca Intesa Sanpaolo and Morgan Stanley have acted as ‘bookrunners’. If big names like JPMorgan Chase, Citigroup or Bank of America are missing, it is no coincidence. Neither are UBS, UniCredit and Nomura, which last month were fined 370 million euros for participating in the worst of the last financial crisis in a cartel in the government bond market in the Eurozone.

“Today we have passed a very important milestone in the implementation of Next GeneationEU, a program that will provide 800,000 million euros at today’s prices to transform the continent for decades. Today we have successfully achieved the first issue. The Commission has raised 20,000 million in the capital markets with a 10-year bond, and in very attractive terms, with less than 0.1% interest. Europe is attractive, “the president of the Commission celebrated this afternoon.n, Ursula von der Leyen.

It is not the first time that the Commission goes to the markets to finance certain programs, nor is it the most important broadcast in its history, but almost. And with the objective of achieving around 80,000 million more this exercise, the community debt becomes a rival to consider for the titles of the North American Treasury.

Upcoming broadcasts

The Commission has a schedule with at least two more issues in the coming weeks, with which it could deal with the first disbursements. Not all countries have yet sent their recovery plans to Brussels, because they have not formed a government, such as the Netherlands, or for other reasons. Those who first complied with the paperwork, such as Spain and Portugalwill receive the go-ahead tomorrow, with an express visit from the President of the Commission, Ursula Von der Leyen. On Thursday, the German will also travel to Greece and Denmark to formalize the go-ahead.

It is not, however, the last step. After the green light from the Commission, the ball goes to the Council, to the governments, who will have a month to examine the Commission’s evaluations themselves. Not so much national plans, but judging whether Von der Leyen’s team has done its job conscientiously. The most orthodox countries do not want this process to be lax, and have demanded since the July negotiations last year that there be sufficient controls to prevent transfers without truly transformative reforms. For this reason, the disbursements will be made in stages, depending on the fulfillment of what was promised, the reforms are made and if the agreed milestones and schedules are respected.

The market was very prepared for this first issue, which has ended up placing much more than expected. It was a touchdown, but those of the past year, to finance programs such as SURE, which has helped the countries most affected by the pandemic to cover employment programs such as ERTE, have already worked well.

In autumn the first fully green emission is expected, given that 30% of the debt placed, more than a quarter of a trillion euros, will have to have that adjective, given that one of the two great engines of recovery and transformation funds is the fight against climate change. The community strategy will include, in addition to auctions, syndicated issues and short-term bills, playing with timetables to obtain the most advantageous returns and not interfere as much as possible with the operations of each of the 27 national treasuries.


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