Euro bailout bonds losing their appeal
Europe’s bailout mechanism–the European Financial Stability Facility–put its latest bonds up for sale yesterday. The markets weren’t enthusiastic: The European Financial Stability Facility’s 10-year bond attracted just over €3 billion in orders, nowhere near the blockbuster turnout for the first bond it issued in January, when orders totaled €44.5 billion for a €5 billion, five-year ...
Europe's bailout mechanism--the European Financial Stability Facility--put its latest bonds up for sale yesterday. The markets weren't enthusiastic:
Europe’s bailout mechanism–the European Financial Stability Facility–put its latest bonds up for sale yesterday. The markets weren’t enthusiastic:
The European Financial Stability Facility’s 10-year bond attracted just over €3 billion in orders, nowhere near the blockbuster turnout for the first bond it issued in January, when orders totaled €44.5 billion for a €5 billion, five-year bond.
The EFSF also had to pay significantly more for this 10-year bond than the similar deal sold in June.
EFSF officials played down the market response. Via Reuters:
The European Financial Stability Facility’s Financial Officer, Christophe Frankel, told Boersen-Zeitung the transaction, in which subscriptions only just covered the 3 billion euros of debt on offer, reflected an unstable market environment rather than funding risks.
"In addition investors are uncertain with a view to the (future role of the) EFSF. For this reason, orders were weaker than usual," he said, adding the transaction — which also paid higher yields than previous EFSF bond sales — was "solid."
Weaker demand from Asian powers acounts for some of the reduced market interest. Japan, which had bought twenty percent of the last ESFF issuance, apparently cut its purchase in half, and it’s not yet clear whether China’s sovereign wealth fund was a buyer.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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