European Union Bailout Funds Sell 3.7 Billion Euros in Bonds

The European Union’s bailout funds sold 3.7 billion euros ($4.9 billion) of bonds as part of efforts to contain the region’s debt crisis.

The EU’s European Financial Stabilisation Mechanism raised 2.7 billion euros from 10-year notes, while the European Financial Stability Facility added 1 billion euros to its 3.875 percent bonds due March 2032, according to data compiled by Bloomberg.

The EFSM, the top-rated bailout fund operated by the European Commission and backed by the EU’s member states, tapped the bond markets for the second time this month to help fund the rescue of Portugal. The EFSF, the EU’s temporary aid fund, issued six bonds this month totaling 28 billion euros.

“The investor support for the EFSF and the EFSM in the last two days has been very positive,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam.

Euro-area finance ministers capped fresh rescue lending at 500 billion euros last month after a German-led coalition opposed further expansion of the anti-crisis firewall.

The EFSM saw “strong and widespread investor demand with books almost three times oversubscribed,” Amadeu Altafaj, a Brussels-based spokesman at the European Commission, the executive arm of the EU, said in a statement.

Bond Pricing

“EFSF’s first tap of an existing bond comes in reaction to strong reverse inquiries from key investors,” Christophe Frankel, the facility’s chief financial officer, said in a statement. “It also provides a complement at the long end of the curve.”

The EFSM’s new bonds were priced to yield 56 basis points more than the swap rate. That compares with a 50 basis-point spread on its 5 million euros of 2.75 percent notes due Sept. 2022.

The fund issued 10.5 billion euros of bonds this year, data compiled by Bloomberg show. It plans to raise a further 2 billion euros in September for loans to Portugal and Ireland, according to the commission’s website.

The EFSF, rated Aaa by Moody’s Investors Service and one step lower at AA+ by Standard & Poor’s, offered investors a yield premium of 105 basis points more than the swap rate for its new bond tap.

DZ Bank AG, Credit Agricole SA (ACA), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Societe Generale SA (GLE) managed the EFSM’s new issue. Barclays Plc (BARC), Goldman Sachs Group Inc (GS) and UniCredit SpA (UCG) managed the EFSF’s bond tap.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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