3. • Economic and political union of 27 countries, with a single market
of 450 million people and a GDP per capita of over €25,000.
• The largest trading bloc in the world, number #1 in both
inbound and outbound international investments. Top trading
partner for 80 countries.
• Responsibility for customs union, competition, single market (intra
EU-trade), external trade centralised at EU level.
• Single monetary policy for the Eurozone countries implemented
by the European Central Bank.
• A common EU budget to boost growth in less developed regions,
finance cross-border projects and address challenges like climate
change, migration, natural disasters.
Key facts
EUROPEAN UNION
3
4. • The European Commission’s priorities that shape the political and policy agenda until 2024 and
serve to address the main challenges faced by the EU include:
› Developing a more attractive investment environment
› Building a climate-neutral, resource efficient and digital Europe
› Promoting European interests and values on the global stage
› Protecting democracy, citizens and freedoms
Political priorities
EUROPEAN UNION
4
6. • The European Commission is empowered by the EU Treaties to borrow from international capital
markets on behalf of the European Union.
• The Commission thus carries out specific borrowing programmes to support EU policy priorities.
• All EU borrowings are direct and unconditional obligations of the EU, and the EU is legally
bound by the Treaty on the Functioning of the EU (Article 323) to service EU debt.
• The EU’s debt service is further ensured through multiple layers of debt-service protection,
including:
› Loan agreements: EU loan beneficiaries have always serviced their debt; and
› The EU budget : a guarantor for all EU debt.
How does EU issuance work?
THE EU AS AN ISSUER
6
7. * Unsolicited rating
• The EU enjoys a high credit rating from all major ratings agencies.
Credit strength
AGENCY
EU CREDIT
RATING
AAA / F1+
Outlook stable
Aaa / (P)P-1
Outlook stable
AA+ /A-1+
Outlook stable
AAA / S-1+
Outlook stable
AAA* / R-1 (high)*
Outlook stable
THE EU AS AN ISSUER
7
8. • The Commission is an experienced player in capital markets, having been active as an issuer for
over 40 years.
• Before 2020, the Commission borrowed only to finance three back-to-back lending programmes:
› European Financial Stabilisation Mechanism (EFSM): preserving European financial stability with up
to €60 billion to support EU Member States experiencing financial difficulties.
› Balance of Payments Facility: supporting reform-led growth with up to €50 billion for EU Member
States outside the euro area experiencing difficulties regarding their balance of payments.
› Macro-Financial Assistance (MFA): providing financial support to countries outside the EU, conditional
on strengthening macro-economic and financial stability.
An experienced player in capital markets
THE EU AS AN ISSUER
8
10. The ECB also launched its €1.350 billion Pandemic Emergency Purchase Programme
• In 2020, the EU Member States joined forces in response to the coronavirus crisis.
On the economic front, this included:
EU economic response (1)
10
THE CORONAVIRUS CRISIS
11. • In addition, EU Member States agreed two new joint issuance programmes, both
unprecedented in scale:
EU economic response (2)
11
Note: All amounts are in current prices.
SURE
Protecting jobs and
incomes during COVID-19
NextGenerationEU
Supporting the EU’s post
COVID-19 recovery
CRISIS MANAGEMENT CRISIS RECOVERY
THE CORONAVIRUS CRISIS
€100 billion €806.9 billion
13. • The SURE lending programme offers Member States up to €100 billion in back-to-back loans to
finance short-term work schemes and other similar measures to preserve employment and
incomes throughout the coronavirus crisis.
• To ensure optimal investor protection, Member States agreed to guarantee the programme with an
additional €25 billion.
• All lending under SURE is financed via Social Bonds, based on a robust Social Bond Framework
compliant with the ICMA’s Social Bond Principals.
• The EU reports on the implementation of the programme twice a year. You can find the latest report
here.
Programme overview
13
SURE
14. • The European Commission has completed 8 SURE transactions on behalf of the EU since
October 2020, bringing the total funding raised under the programme to €91.81 billion.
Programme impact
14
• Member States can still submit requests to receive financial support under SURE up to
the programme’s total limit of €100 billion.
SURE
€30 million €2.5 million €8.2 billion
people supported beneficiary companies were able to
retain workers
saved by Member States in interest
payments thanks to the EU’s strong
credit rating
16. • Up to €806.9 billion until 2026 to support Europe's recovery from the coronavirus pandemic and
build a greener, more digital and more resilient Europe.
• Borrowing backed by budgetary headroom (the difference between the Own Resources Ceiling
of the long-term EU budget and actual EU spending) that has been increased by an additional 0.6
percentage points of EU GNI until 2058.
• At least 37% of the Recovery and Resilience Facility to finance green investments.
• A further 20% of the facility to finance digital investments.
Programme overview
16
NextGenerationEU
17. NextGenerationEU
€806.9 billion
NextGenerationEU
contribution to other programmes
€83.1 billion
REACT-EU
€50.6
JUST TRANSITION FUND
€10.9
RURAL DEVELOPMENT
€8.1
INVESTEU
€6.1
HORIZON EUROPE
€5.4
RESCEU
€2.0
Recovery and Resilience Facility
€723.8 billion
€338.0 in grants €385.8 in loans
POWER UP
Clean technologies and renewables
RENOVATE
Energy efficiency of buildings
RECHARGE AND REFUEL
Sustainable transport and charging stations
CONNECT
Roll-out of rapid broadband services
MODERNISE
Digitalisation of public administration
SCALE UP
Data cloud and sustainable processors
RESKILL AND UPSKILL
Education and training to support digital skills
Breakdown of funds
17
NextGenerationEU
19. • To finance NextGenerationEU, the European Commission will raise up to around €800 billion
through bond issuance.
• This will translate into borrowing volumes of on average roughly €150 billion per year between
mid-2021 and 2026 (actual volumes to vary depending on disbursement needs).
• Thanks to the EU’s high credit rating, the Commission is able to borrow on advantageous
financial terms.
• Borrowing must be repaid by 2058.
• The Commission will seek to raise 30% of the funds through the issuance of NextGenerationEU
green bonds, the proceeds of which are financing finance green policies.
Transforming EU issuances
Given the scale and complexity of borrowing, the EU has adopted DIVERSIFIED
FUNDING STRATEGY similar to that of large sovereigns.
FUNDING NextGenerationEU
19
20. • Long-term borrowing: EU-Bonds
› Regular issuance of liquid benchmark bonds from 3 years to 30 years
› Conventional and green bonds via new bonds or taps
› Expected total volume and issuance weeks announced in 6-monthly funding plans.
› As a general rule, one syndicated transaction and one auction per month, subject to
market conditions.
› Issuance weeks for syndicated transactions announced in the funding plan
› As a general rule, bond auctions on the 4th Monday of every month
› Should market conditions or funding needs dictate that transactions cannot take place
as scheduled, timely communication to the market.
EU funding pillar (1) – EU Bonds
FUNDING NextGenerationEU
20
21. • Short-term borrowing: EU-Bills
› Cost efficient way to fund the cash holdings needed to manage liquidity risk and
temporarily fund NGEU disbursements
› Access to the deep and liquid money market enabling the EU to widen its investor base
by attracting new investors or additional portfolios of existing investors.
› As a general rule, two EU-Bills auctions per month, in 3-month and 6-month maturities.
› On the first Wednesday of the month, a new line with 6-month maturity is created and an
established line with 3-months to maturity is tapped. On the third Wednesday, both lines are
then tapped.
› Auction dates announced in the 6-monthly funding plans, with details of each EU-Bills auction
released on the Friday preceding the auction in question.
EU funding pillar (2) – EU Bills
FUNDING NextGenerationEU
21
22. Multiple instruments: EU-Bonds & EU-Bills, green bonds, liquidity buffer at the ECB.
Different funding techniques: auctions and syndications.
6-monthly funding plans: clear and transparent communication with the markets.
Primary Dealer Network: structured relationships with the banks.
Robust governance framework and risk management.
• The diversified funding strategy gives the Commission the flexibility to adapt to changing
market circumstances and investor needs.
• Mirroring the approach of large sovereigns, the strategy is underpinned by:
The Diversified Funding Strategy
FUNDING NextGenerationEU
22
23. • The EU has built a strong and geographically diversified group of 43 Primary Dealers to support
EU-Bonds and EU-Bills in primary and secondary markets;
Primary Dealer Network
FUNDING NextGenerationEU
23
25. • By law, a minimum of 37% of each Recovery and Resilience Plan – the national spending
roadmaps under the Recovery and Resilience Facility - must be devoted to climate-related reforms
and investments, with many Member States striving to do more.
• The Commission seeks to issue 30% of NextGenerationEU (up to €250 billion in current prices) in
the form of green bonds to finance this expenditure. This will make the EU the world’s largest
green bond issuer.
Driving Europe’s sustainable future
› Confirmation of the Commission’s commitment to sustainable finance
› A new, highly rated, liquid, green asset
› Access to a wider range of investors for the European Commission
› New portfolio diversification opportunities for green investments
› Boost to the green bond market helping accelerate a virtuous circle of sustainable investments
Why the NGEU green bonds matter:
NextGenerationEU GREEN BONDS
25
26. • The Commission has established a NGEU green bond framework to govern the NGEU green bond
issuances.
• The framework has been assessed by Vigeo Eiris, a second party opinion provider, who found that:
› The NGEU green bond framework is aligned with the ICMA green bond principles and
coherent with the Commission’s overall ESG strategy;
› NGEU green bonds provide a robust contribution to sustainability; and
› The Commission provides an advanced level of ESG risk management.
• On the basis of the framework, NGEU green bonds have also been added to the MSCI Global
Green Bond Index.
The NGEU Green Bond Framework (1)
NextGenerationEU GREEN BONDS
26
27. The NGEU Green Bond Framework (2)
EXPENDITURE
EVALUATION
AND
SELECTION
USE OF
PROCEEDS
MANAGEMENT
OF
PROCEEDS
REPORTING
Nine eligible categories:
Research and innovation activities
supporting the green transition
Digital technologies supporting the
green transition
Energy efficiency
Clean energy & network
Climate change adaptation
Water & Waste management
Clean transport & Infrastructure
Nature protection, rehabilitation and
biodiversity
Other.
Climate investments in the
Recovery and Resilience Facility
Tracking the funds spent on green projects
• Real-time green bond “dashboard” launched in
March 2022 (Link here)
Allocation reporting
• Showing how funds have been spent
• Subject to independent external audit
Impact reporting
• Showing what funds have achieved
• Subject to external expert advice
NextGenerationEU GREEN BONDS
27
28. • Launch in March 2022 of the green bond dashboard allows tracking of planned expenditure
eligible to be financed by green bonds
NGEU Green Bond Dashboard
Figures in EUR million
Source: Green bond dashboard
* The European Commission has, as of mid-July, approved in total 25 Recovery
and Resilience Plans of which 3 are still undergoing a due diligence check.
How the planned expenditure is distributed between categories, based on information in the
approved recovery and resilience plans.
NextGenerationEU GREEN BONDS
NextGenerationEU allocation to the
Recovery and Resilience Facility
448 339
Expected total expenditures under the
approved Recovery and Resilience Plans of
22* EU countries. Includes their grant
envelopes and the loans requested to date.
NextGenerationEU amount eligible
for financing through green bonds
159 651
Expenditure in Member States’ Recovery
and Resilience Plans that is eligible for
being included in the pool of
NextGenerationEU green bonds financing.
NextGenerationEU green bonds
issued to date
27 998
Funds raised from capital markets via
NextGenerationEU green bonds. For an
overview of the NextGenerationEU
transactions data to date click here.
NextGenerationEU green bonds
expenditure
5 281
Reported eligible expenditures by Member
States to which green bond proceeds have
been allocated to date.
NextGenerationEU green bonds eligible
amount per expenditure category
28
30. NGEU issuances now more than 15% of the total NGEU funding target
Borrowing (1)
TO NOTE - In line with the Commission Diversified Funding Strategy, funds raised via NGEU bonds may not correspond to funds disbursed.
NextGenerationEU IMPLEMENTATION
Total NGEU issuance
€129 billion
16%
Remaining maximum NGEU
funding envelope
€678 billion
84%
NextGenerationEU long-term borrowing
Total NGEU Green Bonds issued
€28 billion
11%
Expected remaining
Green bond issuance
approx.
€222 billion
89%
Total NextGenerationEU funds - €806.9 billion
30
Source: European Commission
31. €22.4
billion
KEY FACTS
• €22.4 billion EU-bills outstanding
Short-term borrowing
Long-term borrowing
KEY FACTS
• €129 billion EU-bonds of which €28 billion green
• 11 syndications and 8 auctions
• Syndicated transactions 5.9 to 16 times oversubscribed
€17
billion
€6 billion
€5 billion
€6 billion
€16.5
billion
€19
billion
€32.5
billion
€13 billion
€14
billion
Conventional
Green EU-Bills Outstanding
10-year maturity
20-year maturity
7-year maturity
5-year maturity
30-year maturity
3-year maturity
20-year maturity
15-year maturity
25-year maturity
NextGenerationEU IMPLEMENTATION
Borrowing (2)
31
Source: European Commission
Full details on the NGEU transaction can be found in our website: NextGenerationEU transactions data | European Commission (europa.eu)
32. Diversified investor base of more than 1000 different investors from 70 different countries.
NGEU syndicated transactions investor base
NextGenerationEU IMPLEMENTATION
Fund
Managers
33.8%
Bank Treasuries
23.5%
Central Banks /
Official
Institutions
22.6%
Insurance and
Pension Funds
14.3%
Banks
4.2%
Hedge Funds
1.6%
Investor distribution by investor type
UK
23.6%
Germany
13.9%
Benelux
12.0%
Other countries
in Europe
11.8%
Nordics
11.1%
France
9.7%
Asia
6.5%
Italy
7.1%
Rest of World
3.5%
Americas
0.9%
Investor distribution by country / region
* Some of these bonds were tapped in subsequent auctions
32
Source: European Commission
33. • The NGEU green bond programme got off to a strong start in October 2021, as the Commission
issued its inaugural €12 billion, 15-year green bond – the world’s largest green bond
transaction to that moment.
• Since then, the Commission has issued €15 billion more in NGEU green bonds, up to a total of €28
billion, in two more syndicated transactions and two bond auctions.
• All green bond transactions have received strong orderbooks in quality and size.
• This reflects the value that investors are placing in the NGEU green bond programme, as well as
the sustainability credentials of the EU.
Green bonds - issuances
The NGEU green bond programme is continuing to build momentum
33
NextGenerationEU IMPLEMENTATION
34. The NGEU green bond programme is attracting a wide range of investors
Green bonds – investor base
Fund
Managers
34.4%
Bank
Treasuries
23.3%
Insurance and
Pension Funds
20.2%
Central Banks /
Official
Institutions
14.8%
Banks
6.3%
Hedge Funds
1.1%
Investor distribution by investor type
UK
21.9%
Germany
14.4%
Benelux
13.7%
France
11.8%
Nordics
11.4%
Italy
9.0%
Other Europe
8.3%
Iberia
3.7%
Rest of
World
2.7%
Asia
2.0%
Switzerland
1.1%
Investor distribution by country / region
34
NextGenerationEU IMPLEMENTATION
Source: European Commission
35. EU outstanding amounts of benchmark bonds
35
35
In
EUR
Billion
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
EFSM SURE MFA NGEU
Green
Bond
Green
Bond Green
Bond
Source: European Commission
37. EU bonds’ liquidity on par with European sovereigns
MARKET PERFORMANCE OF EU ISSUANCE
0%
10%
20%
30%
40%
50%
60%
70%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2020 2021 2022
EU market EGB market* (average 2020-2021)
Quarterly secondary market turnover of EU and European Government Bonds (EGB)
(% of outstanding volume)
37
Source: European Commission based on Bloomberg data.
Note: European Government Bond (EGB) market here comprises Euro-area sovereigns, the European Financial Stability Fund and the
European Stability Mechanism. Data for this market was not available for Q1 2022.
38. There is a strong correlation between NGEU yields and risk appetite
EU bonds acting as a safe haven
MARKET PERFORMANCE OF EU ISSUANCE
-2
-1.5
-1
-0.5
0
0.5
1
-40
-20
0
20
40
60
80
NGEU 10y monthly variation (LHS, in basis points)
Stable or declining NGEU
yields when risk appetite
basis points
38
Source: European Commission based on Bloomberg data.
Note: risk appetite index calculated based on factors such as credit spreads and volatilities of financial assets. When these variables increase,
the risk appetite index decreases.
39. Source: European Commission based on Bloomberg data
Note: based on the period from July 2021 to July 2022. Correlation based on weekly changes in yields. Correlation based on weekly changes in yields. Weights of
the basket (approximately 50-50) calculated on a daily basis as a function of the volatility of DE and FR yields
Tenor
Correlation of the basket
composed of DE-FR with NGEU yields
Average NGEU
pick-up over the
basket (in bps)
5y 99% 20
10y 99% 17
30y 98% 13
EU bond yields are highly correlated to DE/FR basket (99% correlation) while offering a good
pick-up
EU bonds are offering attractive relative returns (1)
MARKET PERFORMANCE OF EU ISSUANCE
39
40. 40
MARKET PERFORMANCE OF EU ISSUANCE
EU bonds are offering attractive relative returns (2)
Source: Bloomberg data
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Mar-23 Apr-27 Jun-31 Jul-35 Aug-39 Sep-43 Nov-47 Dec-51
Yield curves of the EU, French and German bonds (as at 30/06/2022)
EU FR DE
42. • To facilitate communication with investors and coordination with sovereign issuers, the
Commission publishes biannual funding plans which frame the NGEU borrowing activities it
will undertake in the coming 6 months.
• NGEU funding plan for the second half of 2022 was released in June 2022
• NGEU target for long-term funding for the second half of 2022: €50 bn via both
conventional and NGEU green bonds*.
• Further use of auctions with exact ratio between auctions and syndications to depend on the
market conditions and the Commission’s exact funding needs.
NGEU funding plan – H2 2022
The Funding Plan frames the borrowing to be undertaken over the coming 6 months and
facilitates communication with investors and coordination with sovereign issuers.
*The Commission will also continue to be present in the market in the context of its other financing programmes (SURE
and MFA), with an estimated funding volume over the period June to December 2022 of up to ca. €15.5 billion.
FUNDING NextGenerationEU
42
43. • To fund NGEU, the Commission is expected to borrow on average up to roughly €150 billion per
year between mid-2021 and 2026.
• However, exact volumes may fluctuate throughout this period, depending on the Commission’s
disbursement needs.
• Beyond 2026:
› Need to roll-over maturing NGEU issuances until full repayment by 2058.
› The Commission will continue to be present in the market in the context of its other financing
programmes (the EFSM, SURE and MFA).
Outlook for EU joint issuance to 2026 and beyond
FUTURE OUTLOOK FOR EU JOINT ISSUANCE
43
44. v
Risk.net
• SSAR Risk Manager of the
Year 2021
Awards to EU borrowing and lending activities
IFR/ Refinitiv
• SSAR Issuer of the Year 2020 & 2021
• Euro Bond of the Year 2021 for
NGEU’s 1st bond
• SSAR Bond of the Year 2021 for
NGEU’s 1st bond
• Sustainable Bond of the Year 2021
for NGEU’s 1st green bond
Global Capital
• Supranational Euro Bond of the Year 2020 for SURE’s
1st issuance
• Most Impressive SSA Issuer in Euros of the Year 2021
45. For more information:
Check out our EU as a borrower website: https://europa.eu/!mq99rn
Get an overview of the NGEU borrowing in its 1st year of operations:
https://europa.eu/!3QB7Qv
Get in touch: EU-INVESTOR-RELATIONS@ec.europa.eu
Follow us on social media:
@JHahnEU @EU_Budget @GertJanEU
