Foreword

Dear readers,

On 19th March, a proposal for a new financial instrument aimed at helping Member States to accelerate the procurement of defence capabilities - the Security Action for Europe (SAFE) - was tabled by the European Commission. Subject to the adoption of the proposal by Member States and the completion of the necessary legislative processes, the Commission will be called upon to issue under this new instrument up to €150 billion of additional funding until end-2030. New funding needs will be intergraded in the Commission’s established unified funding approach, allowing Member States to benefit from the EU’s strong credit rating, the high liquidity of EU Bonds and the high market demand for EU issuances. 

The extended time horizon of the new programme (to end 2030) and the demand driven nature of disbursements, mean that the Commission will be able to mobilise the funds smoothly and as needed with short-term and long-term funding across the yield curve.  The Commission possesses the flexibility under its issuance programme to accommodate funding needs from this programme without requiring any significant change to previously planned issuance volumes in 2025 and 2026. If approved, the SAFE mandate will provide confidence on the permanence of the EU as a regular issuer of large and liquid benchmark bonds. A dedicated article in this newsletter sets out the details of this proposal.

The European Commission has already (via IIIA announcement on 6th of February) confirmed that there will be no change to the EU’s funding target of €90 billion of bonds for the first half of 2025.  Supported by marked increases in the secondary market liquidity of EU Bonds and thanks to continued strong support from investors, almost 50% of the H1 funding plan for EU Bonds has already been successfully raised in Q1. As a result, the total amount of outstanding EU-Bonds now stands at €623 billion, of which €73 billion in the form of NGEU Green Bonds.

The EU-Bill programme has also been reinforced with a 12-month line added to the 3- and 6- month tenors since January. This new Bill has been positively received by the market over the course of the first six Bill auctions this year. A new format of 3-leg EU-Bond auctions will be introduced as planned in the upcoming quarter. You can read more about the increased depth of the EU-Bonds market here.

In keeping with usual practice, we will continue to update you of developments related to EU borrowing operations through the established communication channels. This includes communication in June of the EU funding plan covering the second half of 2025. In the meantime, don’t forget to “save the dates” for two upcoming flagship events: the EU Annual Budget Conference in May and the Commission-EIB-ESM co-hosted Capital Markets Seminar taking place this year in October.  Click here for more details on both of these events.

Finally, in this edition of our newsletter we feature a special article on STEP – the EU’s one-stop-shop for investors seeking to capitalise on the rapid growth of strategic technologies in Europe.

Thank you once again for your continuous support,

The Borrowing and Lending team of the European Commission