The NextGenerationEU is a € 800 billion temporary recovery instrument to help European economies emerge out of the pandemic
The European Commission today, i.e., Wednesday, June 16, 2021, under the NextGenerationEU Initiative, raised € 20 billion via a 10-year bond, due on July 4, 2031, to fund European countries in recovering from the economic crisis of Coronavirus (COVID-19) and subsequent lockdowns.
This is the largest-ever institutional bond issuance in Europe, the largest-ever institutional single tranche transaction and the largest amount the European Union (E.U.) has raised in a single transaction.
The NextGenerationEU is a € 800 billion temporary recovery instrument to help European economies emerge out of the pandemic and help build a greener, more digital and more resilient Europe. The funds will be raised from market till 2026. Of this, € 407.5 billion will be available for grants under Recovery and Resilience Facility (RRF) and other E.U. budget programmes. Another € 386 billion would be in form of loans. This will translate into borrowing volumes of an average of roughly € 150 billion per year.
Taking it to twitter, the official twitter handle of European Commission tweeted,
Today is a historic day: we have successfully conducted the 1st borrowing operation to support Europe’s recovery.
— European Commission 🇪🇺 (@EU_Commission) June 15, 2021
As a strong Union, we are raising money at the markets together and investing in a common recovery and in the future of Europe's next generations.#NextGenerationEU
The President of European Commission – Ursula von der Leyen tweeted,
Today we reached a key milestone in implementing our recovery plan #NextGenerationEU.
— Ursula von der Leyen (@vonderleyen) June 15, 2021
We have successfully conducted the first fund-raising operation.
The @EU_Commission has raised €20 billion with strong interest from investors worldwide. https://t.co/2236kKSa7E
Speaking on the occasion, the Commissioner in charge of Budget and Administration – Johannes Hahn, said, “Today, we have reached a key milestone in implementing NextGenerationEU. After laying all the foundation at record speed, we have today successfully conducted the first borrowing operation under the Recovery Plan. This is just a very first step of a long journey, bringing over €800 billion in current prices into the EU economy. NextGenerationEU has now become a reality and is set to drive our collective recovery from the pandemic, setting Europe on a green, digital and resilient path.”
The 10-year bond carries a coupon of 0% and came at a re-offer yield of 0.086% providing a spread of -2 Basis Points (BPS) to mid-swaps, which is equivalent to 32.3 BPS over the 0.00% Bund due February 2031. The bond has been oversubscribed by 7 times and the final order book is in excess of € 142 billion. The joint lead managers for the bond issuance were BNP Paribas, DZ BANK, HSBC, IMI-Intesa Sanpaolo and Morgan Stanley. The demand was dominated by fund managers (37%) and bank treasuries (25%) followed by central banks / official institutions (23%).
By the end of 2021, the European Commission is looking to raise some € 80 billion in bonds. These will be complemented by short-term E.U.-Bills. The E.U. Bills are short-term securities with a shorter maturity of below 1 year.
The exact amount of both E.U.-Bonds and E.U.-Bills will depend on the precise funding needs and the Commission will revise its initial assessment in the autumn.
