This week the European Union (EU) will issue a benchmark bond with 10 years maturity to fund lending to Portugal granted under the European Financial Stabilisation Mechanism (EFSM). In this context the EU/EFSM and the European Financial Stability Facility (EFSF) have updated and coordinated their 2011 bond issuance calendars, for the purpose of funding loans to Ireland and Portugal as agreed in the respective financial assistance packages.
Within the coming weeks, the EU, through the European Financial Stabilisation Mechanism (EFSM) plans to launch a total of € 7–10 billion bonds in 2 or 3 transactions and with maturities between 5 and 15 years.
The first transaction by the EU/EFSM will be a benchmark bond with 10 years maturity due in September 2021. The bond is expected to be launched during the course of this week.
The issuance calendars of EU/EFSM and EFSF are closely coordinated to ensure smooth market operations.
The EFSF does not plan to launch long term bonds until the euro-area Member States have approved the enhanced EFSF, which is expected by mid-October.
Further remaining funding requirement of EU/EFSM and EFSF in 2011 for loans to Ireland and Portugal is in total about € 10-13 billion, out of which the EU/EFSM intends to do one benchmark transaction and the EFSF will fund the remainder. The total funding commitments by EFSM and EFSF to Portugal and Ireland remain unchanged for 2012-2013.
Various borrowing operations by EU/EFSM and EFSF have already taken place until to date in order to cover previous loan disbursements to Ireland and Portugal for a total amount of € 27 billion. Thereof, € 17.9 billion was funded via 4 benchmark bonds by the EU/EFSM and € 9.1 billion via 3 benchmark bonds by the EFSF. Complementary disbursements have been made by the IMF as agreed in the respective EU/IMF programmes.
The EU and EFSF are rated AAA/Aaa/AAA by the three major rating agencies, Standard & Poor’s, Moody’s and Fitch. Issuances by the EU are executed by the European Commission’s financial operations department located in Luxembourg. Issuances by the EFSF are executed in close cooperation with the German Debt Management Office (Finanzagentur).