EU Braves Summer Lull for Third Bond Sale to Fund Recovery

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The European Union is returning to bond markets with a third sale under its NextGenerationEU program just in time for the summer lull.

The EU’s offering of 10 billion euros ($11.9 billion) of 20-year debt -- part of a program to help member states recover from the pandemic -- drew demand of more than 81 billion euros. That compares with a record 145 billion euros for a social bond sold last year.

While a wide investor base should support demand for the 10-year offering, it may not match appetite for the previous sale of this tenor given a reduction in trading liquidity over the summer holiday season, according to Jens Peter Sorensen, chief analyst at Danske Bank A/S.

The bloc is also offering 5.25 billion euros of 10-year notes, with order books exceeding 47 billion euros. Final terms for the 10-year issue stood at six basis points below mid swaps, while the 20-year tranche will price at seven basis points above.

Pricing for both tenors is around one to two basis points inside the EU’s existing curve, according to prices compiled by Bloomberg.

The EU debuted a 20-billion-euro sale of 10-year securities last month, for which order books hit 142 billion euros. That was followed by the sale of 15 billion euros of five- and 30-year notes, which received combined orders in excess of 171 billion euros. The sales are part of the EU’s goal of issuing $1 trillion of debt over five years to finance grants and loans to member states.

Three banks who were excluded from the first offering -- Barclays Plc, Bank of America Corp. and Citigroup Inc. -- will be joined by BNP Paribas SA and Commerzbank AG as joint lead managers for Tuesday’s sale.

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