EU Racks Up Another $100 Billion Order for Prized Social Bonds

The European Union took advantage of high demand for its social bonds to accelerate funding for a regional jobs program.

The bloc pulled in above 96.5 billion euros ($114.5 billion) of orders for a 13-billion-euro offering of five-year and 25-year notes. This syndication is the second in March and will mean the EU is three-quarters of the way through funding its 100 billion-euro SURE jobs program.

That’s just a taster of the deluge of issuance to come under its recovery fund later this year. While demand in this latest offering was lower than some of the previous sales, overall they have bucked the slide in appetite for bonds seen globally during a reflation-fueled rout.

“Demand has been solid at the EU deals,” Jens Peter Sorensen, chief analyst at Danske Bank A/S. “It has been massive -- the amount of issuance in such a short period.”

EU Racks Up Another $100 Billion Order for Prized Social Bonds

Concern that the enormity of the EU’s social bond supply would weigh on investor appetite for national government debt in the region has so far proved unfounded, with the sustainable label attracting a different pool of investors, according to Sorensen. Earlier this month, France amassed its biggest-ever green bond orderbook in its second sale of new debt, while Italy’s debut offering smashed demand metrics.

BNP Paribas SA, Bank of America Corp., DZ Bank AG, Morgan Stanley and Societe Generale SA were appointed as joint lead managers on the EU deal. The bloc trimmed pricing, with the five-year at 14 basis points below swaps compared to 12 in the initial guidance. The 25-year tranche will price at one basis point above swaps, inside an initial target of three basis points.

Tuesday’s sale is “pretty healthy overall,” according to Michael Leister, head of rates strategy at Commerzbank AG. “Pricing considerations are more important than the lower oversubscription levels than at past SURE transactions.”

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