Europe Completes First Bill Sales to Aid Pandemic Recovery

(Bloomberg) -- The European Union sold short-dated bills for the first time on Wednesday, bringing another type of debt instrument into its expanding portfolio of tools. 

The bloc sold 3 billion euros ($3.5 billion) of 77-day bills at an average yield of -0.726%, and 2 billion euros of 168-day bills at -0.733%. The three-month securities had a bid-to-cover rate of 3.39, while the six-month securities were more oversubscribed at 5.76. The EU plans to sell the tenors on the first and third Wednesday of each month, with other maturities up to one year possible but not yet considered.

“The EU takes another step closer to becoming a leading debt issuer, alongside Japan, the U.S. and EU sovereigns,” said Vuk Magdelinic, chief executive officer of fixed income analytics firm Overbond.

Selling bills allows the EU to establish a presence in the deep and liquid money market, something officials sought as a quick way to raise cash as its bond program develops. It’s the latest innovation in a NextGenerationEU program that aims to raise about 800 billion euros of debt over five years to finance grants and loans to member states. Almost a third of that amount will be in green bonds, which the bloc will start to sell in October. 

“As the EU starts to issue more bonds and bills under the NextGen scheme, we could see more liquidity and increased dealer-to-dealer activity as a result, as opposed to end investors buying the bonds and financing them through the repo markets on a periodic basis,” said John Edwards, global head of the BrokerTec platform. 

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