The European Commission has successfully raised €8 billion in EU-Bonds through its 11th syndicated transaction for 2023. This milestone dual tranche transaction consisted of a new €5 billion, 5-year bond due on 5 December 2028 and a €3 billion tap of the NextGenerationEU Green Bond maturing on 4 February 2048.
Investors exhibited robust interest in the deal, with bids totaling over €66 billion for the new 5-year bond and over €70 billion for the 24-year NGEU Green Bond. This represents an oversubscription rate of approximately 13 times and 24 times, respectively.
With this transaction, the total volume of NextGenerationEU green bond issuances has reached €47.2 billion. The proceeds will be utilized to finance green projects outlined in the member states’ national Recovery and Resilience plans (RRPs), which serve as the roadmaps for spending under NextGenerationEU. The NGEU green bond issuances are closely aligned with member states’ reported green expenditures and are backed by a substantial pool of eligible projects.
This syndicated transaction marks the conclusion of the EU’s issuance activities for this year, contributing to a total issuance volume of €34.2 billion in the second half of 2023. The Commission has announced that it will finalize its bond issuances for the year with an auction of up to €4 billion on 27 November.
The European Commission borrows from international capital markets on behalf of the European Union and disburses these funds to Member States and third countries through various borrowing programs. EU borrowing is backed by the EU budget, with contributions from all Member States being an unconditional legal obligation under the EU Treaties.
Since January 2023, the European Commission has transitioned to issuing single-branded EU-Bonds instead of individually labeled bonds for specific programs. The proceeds from these bonds are allocated to relevant programs based on specified procedures. The NextGenerationEU Green Bond issuances continue to exclusively fund measures eligible under the NextGenerationEU Green Bond Framework.
From mid-2021 based on EU-Bonds and NextGenerationEU Green Bonds raised, the Commission has disbursed a total of €174.7 billion in grants and loans to EU Member States through the Recovery and Resilience Facility. Additionally, the Commission has granted €15 billion to Ukraine under the Macro-Financial Assistance + program, with an additional €1.5 billion disbursement scheduled for later this month.
To enhance the secondary market liquidity of EU-Bonds, the Commission has introduced a framework to provide investors with pricing quotes for EU securities on electronic platforms. This initiative, initiated on 01 November 2023, aims to further support the use of EU-Bonds in repurchase agreements, scheduled for implementation by mid-2024.
The successful syndication of the 5-year bond and the NextGenerationEU Green Bond highlights the resilience of the EU funding program amidst challenging conditions for issuers in 2023. The strong demand for the green line of the transaction reflects the trust investors place in the EU’s NextGenerationEU green bond program. The Commission remains committed to transparency and will publish its NGEU green bond allocation impact report later this year, further strengthening this trust.
Budget and Administration Commissioner Johannes Hahn expressed satisfaction with the results of the syndication, emphasizing the Commission’s dedication to transparency and accountability.
Market Capital Research 