Wed. Dec 2nd, 2020
European Union is the new ‘big beast’ on the bond markets

In uncertain times, investors cast about for ways to keep their money safe. Until now, the benchmark for such an investment has been German bunds: the debt issued by the federal government to finance its spending. There is never any shortage of takers, so Berlin has long enjoyed access to cheap debt.

But as of this week, there’s another contender for that top status: the European Union itself.

With the help of banks Barclays, BNP Paribas, Deutsche Bank, Nomura and UniCredit, the European Union waded into the bond markets this week, hoping that its triple-A credit rating would attract investors to buy its debt.

To say it wasn’t disappointed is an understatement. Brussels looked to issue €17 billion in debt. Investors offered €233 billion. The debt issuance was over 13 times over-subscribed.

Bankers told the Financial Times this was the “largest ever order book in global bond markets”, a level of demand described as “outrageous”.

“The German bund has a serious rival,” reported Bloomberg. “There’s a big new beast on the debt circuit.”

The wild amount of money that investors were prepared to offer the EU is taken to reflect two things: the demand for secure investments and a perception that the bloc can be counted on to ultimately repay the money.

Brussels hardly concealed its delight at this vote of confidence.

“We could have raised €233 billion, which is a sign of the great market interest and trust towards the EU as an issuer,” EU budget and administration commissioner Johannes Hahn told a news conference.

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