Bloomberg News

EU Said to Sell 3 Billion Euros of Bonds Through EFSM Fund

January 09, 2012

(For more on euro crisis click on EXT4. Adds Merkel, Sarkozy’s meeting in seventh paragraph.)

Jan. 9 (Bloomberg) -- The European Union is selling 3 billion euros ($3.8 billion) of 30-year bonds to help pay for the rescues of Ireland and Portugal, in the first deal by the 27-nation bailout fund in more than three months.

The European Financial Stabilisation Mechanism’s bonds will be priced to yield 125 basis points more than the benchmark swap rate today, according to a banker involved in the transaction. The sale is the first from the EFSM, the 60 billion-euro fund of the EU’s executive arm, since it issued bonds due 2018 on Sept. 29, according to data compiled by Bloomberg.

“It’s somewhere to park your money with relatively low risk, which really is something that many investors are on the hunt for given the ongoing declining scope of safe havens,” said Richard McGuire, a senior fixed-income strategist at Rabobank International in London.

The EFSM is operated by the European Commission and backed by the EU’s member states. Like the 440 billion-euro European Financial Stability Facility, which is guaranteed by euro-region nations and sold 3 billion euros of bonds last week for Ireland and Portugal, it borrows money to siphon to cash-strapped governments.

Amadeu Altafaj, a spokesman for the Commission in Brussels, declined to comment.

Longest Maturity

The bond has the longest maturity of any notes offered through the EFSM, according to data compiled by Bloomberg. Previously, the longest-dated bond sold by the fund was the 4 billion-euro 3 percent note due in 2026 issued on Sept. 22, Bloomberg data show.

The EFSM is selling the bonds as German Chancellor Angela Merkel and French President Nicolas Sarkozy meet for the first time this year to flesh out measures to resolve the euro-region debt crisis that started in Greece more than two years ago.

The bonds’ maturity “shows confidence in the EU but doesn’t necessarily mean there’s confidence in the euro,” said David Watts, a strategist at CreditSights Inc. in London.

The price of the EFSM’s 1.1 billion euros of 2018 securities rose to 99.44 cents on the euro, after declining to 95.11 in November, according to Bloomberg Bond Trader prices.

BNP Paribas SA, Barclays Capital, Deutsche Bank AG and Goldman Sachs Group Inc. are managing the new issue, said the banker, who declined to be identified before an official announcement. The EFSM has already raised 28 billion euros for Portugal and Ireland through bond sales in the past year, according to data compiled by Bloomberg.

--Editors: Paul Armstrong, Michael Shanahan

To contact the reporter on this story: Ben Martin in London at bmartin38@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net


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