EU Unveils Pooled Sovereign-Debt Plan Amid German Resistance
- New securities will be tranched in senior and junior segments
- Sovereign-backed products will be treated as government bonds
Photographer: Akos Stiller/Bloomberg
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The European Commission formally unveiled a proposal to facilitate the development of sovereign bond-backed securities, or SBBS, as it seeks to shield Europe’s bond market from future crises in the face of German opposition to any instruments that would mutualize public debt.
The plan, which comes as Italian bond yields jumped to multi-year highs, foresees the creation of securities backed by sovereign bonds from all euro-area member states according to their economic weight. The securities would be issued and bought by private investors, who would also bear the risks from losses in the underlying pool, according to the proposal.