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18 March 2014

EU issues €2.6 billion 10-year bond for Ireland and Portugal

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This will be lent onwards to Ireland (€0.8 billion) and to Portugal (€1.8 billion), as part of their financial assistance programmes. For Ireland, it is the last EFSM disbursement under the programme. For Portugal, only one further disbursement is now outstanding.

Market access at favourable conditions has recently been confirmed for both countries.

This 10 year bond is the first of two EFSM funding transactions planned for 2014, following an absence from the market since 2012. The further funding plan is €2.1 billion for EFSM and up to €2 billion under the Macro-Financial Assistance (MFA) Programme, including funding for loans to Ukraine.

The bond amount was determined by the loans to Ireland and Portugal. The 10-year maturity was decided as the best re-entry point for the borrower due to its prolonged market absence and as the EU reference curve missed a 10-year bench mark point. In addition, the 10-year maturity was expected to bring in both demand from the shorter term investors like official institutions and bank liquidity portfolios and the longer-term investors from the insurance sector and pension funds. The bond maturity does not determine the ultimate loan maturity as all bonds maturing until 2026 can be refinanced to extend initial loan maturities.

Books were opened at 9am CET with a price guidance of mid-swaps +10 area and closed at 11am, containing orders with 140 investors involved and more than 110 order allocations. Total book size excluding lead interest was above €4.7 billion. Price was fixed at mid-swaps +9 basis points, tighter than the initial pricing thoughts at +11 area.

The €2.6 billion bond matures on 4 April 2024, pays a coupon of 1.875 per cent, lowest coupon ever achieved by the EU, and yields 1.919 per cent. Funding costs will be passed on to the beneficiary countries without any margin. The disbursements are foreseen for 25 March 2014, settlement date of the bond.

Full press release

© European Commission

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