How EU issuance works

The European Commission is a well-established issuer on capital markets.

Since January 2023, the Commission has been placing its borrowing on capital markets using a unified funding approach. Under this approach, all Commission issuances come with an EU-Bonds label rather than a label specific to the individual programmes the bond will fund (SURE, MFA etc).

The EU's unified funding approach in a nutshell

The Commission's unified funding approach is an extension of the diversified funding strategy originally put in place for borrowing under the NextGenerationEU programme. Under the unified funding approach, the Commission issues single branded EU-Bonds and allocates the proceeds to a central funding pool from which the EU's different policy programmes are funded.

The approach combines the use of different funding instruments and funding techniques with open and transparent communication to market participants. It is characterised by:

Multiple funding instruments (EU-Bonds and EU-Bills) to maintain flexibility in terms of market access and to manage liquidity needs and the maturity profile;
A combination of auctions and syndications, to ensure cost efficient access to the necessary funding on advantageous terms;
Structured and transparent relationships with the banks supporting the issuance programme (via a Primary Dealer Network);
Clear communication with the markets: An annual borrowing decision; bi-annual funding plan, to offer transparency and predictability to investors and other stakeholders; Quarterly investor newsletter.

The unified funding approach will remain the Commission's main approach to markets for other borrowing going forward, as stipulated in the EU's financial rules, the financial regulation. All of the Commission's borrowing operations are encoded in a robust governance framework, which ensures coherent and consistent execution.

Funding plans

In line with established market practice, the Commission publishes an Annual borrowing decision and Semi-annual funding plans.

The annual borrowing decision and the semi-annual funding plans are key to ensuring the sound financial management, accountability and transparency of the EU's debt management operations. They are also an essential part of our commitment to transparency towards market participants.

The annual borrowing decision lays out the maximum amount of borrowing the Commission can execute in a given year, while the semi-annual funding plan sets out the Commission's indicative issuance calendar and expected total issuance volumes for the forthcoming 6 months.

Read our latest funding plan

Funding instruments

To be able to place its issuance under optimal conditions, the Commission uses EU-Bonds with varying maturities as well as short-term debt instruments – EU-Bills. The Commission is also active in the green bond space with its NextGenerationEU Green Bonds.

Funding techniques

The use of a variety of funding techniques enables the Commission to attract the necessary funding (even under difficult market conditions), enlarge its investor base and reduce funding costs.

To achieve this, the Commission relies primarily on a combination of syndications and auctions. The Commission is applying a progressive approach in order to ensure optimal balance between syndications and auctions over time, taking into account the reaction of market participants.

The Commission also occasionally uses private placements.

Syndication
For syndicated transactions, the Commission works with a group of underwriters, usually banks, whose role is to place the debt with investors. Syndications are the traditional technique for debt issuance by supranational issuers. The Commission relies on syndications for a substantial part of its bond issuances.
Auctions
To ensure greater cost-efficiency, the Commission added auctions to its toolbox in 2021. Auctions are the preferred issuance technique of large sovereigns like Germany and France. The Commission is using the Banque de France's TELSAT auction system to carry out its auction operations. The Commission uses the auction format to issue all of its EU-Bills as well as some of its longer-term EU-Bonds. More information about the Commission's approach to auctions is available in the dedicated section of the website.
Private placements
The private placement of a bond involves its placement with pre-selected investors and institutions rather than through public offer. This technique is typically used for the placement of small amounts (up to €300 million) with one or more institutional investors. In the past, the Commission has mainly used private placements for transactions under its MFA programme. The Commission continues to use private placements as a transaction format where appropriate.

Back-to-back funding

Under the back-to-back approach, the Commission issues bonds and transfers the proceeds directly to the beneficiary country on the same terms that it received (in terms of interest rate, maturity).The timing, volume and maturity of bond issuances is hence determined entirely by the needs of the beneficiary.

This method proved successful in addressing smaller funding needs. However, it reached its limits with the SURE programme, where 19 Member States had to be served by a single funding programme.

To respond to the needs of the bigger and more complex NextGenerationEU programme, the Commission put in place a diversified funding strategy. The diversified funding strategy decouples the funding transactions from the programme's immediate funding needs, providing more flexibility in the execution of borrowing operations.

In 2023, the Commission extended the use of the diversified funding strategy to the financing of other programmes, putting in place a unified funding approach.

Primary Dealer Network

The EU Primary Dealer Network facilitates the efficient execution of auctions and syndicated transactions, supports liquidity in secondary markets, and ensures the placement of EU debt with the widest possible investor base.

The EU Primary Dealer Network reinforces the Commission's funding capacity and ensures transparent relations with the banks that support the placement of EU borrowing.

Documents

Documents linked to the EU's unified funding approach are available in the documents' section of our website.