European fund lays out debut bond issue

09:04, January 26, 2011      

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The European Financial Stability Facility, the 440 billion-euro (US$599 billion) fund being used to bail out Ireland, launched its debut bond issue yesterday with demand dwarfing the 5 billion euros on offer.

The EFSF is AAA-rated and was always expected to attract strong interest for the almost 16 billion euros the fund is expected to issue in 2011.

A source at the EFSF said it closed the order book with demand at 43 billion euros, nearly nine times the 5 billion euros of paper on offer - a sign of confidence in the facility and by extension the euro zone as it seeks to get on top of its debt crisis.

"High demand is likely to be interpreted as showing there is confidence in this mechanism and, as a consequence, in the whole euro system," said Michael Leister, a debt strategist at WestLB in Dusseldorf.

Investors in Asia are expected to have bid strongly for the bonds, looking to add AAA-rated paper to their portfolios.

"It was always going to go well with the likes of the Japanese and Chinese reserve fund managers - and probably a whole heap of others - piling into it like there's no tomorrow," said Marc Ostwald, strategist at Monument Securities.

The bond was priced at mid-swaps plus 6 basis points, a source at one of the lead managers said.

The EFSF was established in May 2010 after European Union leaders agreed they needed a multi-billion-euro facility to handle future debt crises after Greece was forced into a bailout when it became impossible to finance itself on international markets.

Source: Shanghai Daily
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