With the European Commission securing €7 billion in its 10th syndicated bond transaction of 2024, remarkable investor confidence and the underpinning commitment to sustainability along with strategic funding goals have underscored the success. In this issuance, €3 billion is dedicated as NextGenerationEU (NGEU) Green Bonds to finance green projects across EU Member States.
EU Bonds: Breaks Record Demand
The Tuesday announcement of the issuance saw bond euphoria with the submission orders nearing 17 times that of the 7-year bond and 27 times for the 18-year green bond, respectively. The order book sums up to more than €140 billion, reflecting the credit quality of the EU along with strong confidence from investors.
“Today’s €7 billion transaction shows the ability of the EU to raise funding needs efficiently, while complying with the strictest standards of sustainability,” the European Commission said.
Bond Issuance Details
The €7 billion raised consists of two tranches:
- €4 billion tap of a 7-year bond that matures on December 4, 2031; carries a 2.5% coupon, and re-offer yield of 2.719%.
- €3 billion tap of an 18-year green bond, due February 4, 2043 with a 1.25% coupon and 3.260% reoffer yield
Joint lead managers on the transaction were BofA, Crédit Agricole CIB, Deutsche Bank, HSBC and Nomura
Strategic Allocation of ProceedsThe proceeds from this issue will finance several key initiatives in the EU:
- RRPs: Recovery and Resilience Plans, NextGenerationEU, Financing national reforms and investments geared toward economic recovery and long-term growth across Member States.
- Ukraine Support: More than €10 billion has already been paid out under the Ukraine Facility in 2024 as part of continued support by the EU to the country in view of the geopolitical challenges it faces.
- Green Projects: €3 billion from the green bond tranche will be dedicated to projects within the NGEU Green Bond Framework, which conform with the International Capital Market Association’s (ICMA) Green Bond Principles.
Towards Achieving the Funding Targets
The deal takes the EU one step closer to its €65 billion target for the second half of 2024. Since the launch of the integrated funding approach, the EU has raised €426.58 billion, with almost €262 billion disbursed under the Recovery and Resilience Facility.
Total outstanding debt in the EU is now at €596.46 billion, which includes €22 billion in EU Bills. This strong funding strategy enables the European Commission to effectively finance its policy programs while meeting the demands of very high sustainability standards.
Landmarks in Green Finance
The NGEU Green Bonds again take center stage in this issuance, enhancing further the EU’s leadership in green finance. With the tranche of €3 billion coming directly to green projects, from renewable energy initiatives to sustainable transport, it is definitely a commitment to climate action of the EU.
For clarity and accountability in transparency, updates on these funds with detailed reports are available on the NGEU Green Bond Dashboard.
On the Horizon
The European Commission will soon issue a bond under an EU Bond auction on November 25, 2024. As the EU pursues its ambitious funding program, the dual focus on the recovery of economy and sustainability further cements its status as a global leader in finance both innovative and responsible.
This latest transaction not only boosts the financial resilience of the EU but also cements its commitment to a green and inclusive future.