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EU’s Social Bonds Draw $275 Billion to Set Global Demand Record
Posted
October 23, 2020
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1,009
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22
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October 23, 2020
1,009
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2:05Now PlayingThe European Union’s first offering of social bonds drew orders of more than 233 billion euros ($275 billion), likely to be the biggest ever for any debt deal.
The bloc’s 17-billion-euro, two-part sale was nearly 14 times subscribed. The orderbooks easily topped the $120 billion of demand seen for CVS Health Corp.’s corporate offering in 2018 and Italy’s previous European sovereign record of 108 billion euros, according to data compiled by Bloomberg.
The sale marks the arrival of a major new safe asset, with investors drawn to a AAA credit rating and the fastest-growing part of sustainable finance. The offering, also the EU’s first joint debt since the bloc agreed a landmark pandemic recovery deal, is aimed at providing funding for a job support program.
“I was expecting a three-digit book but not quite this high,” said Jan von Gerich, chief strategist at Nordea Bank Abp. “These bonds were clearly eagerly awaited, and these issues only strengthen the picture that there is a huge demand for bonds at the moment.”
Social bonds are defined by funding for projects that help society, such as improving social welfare or serving disadvantaged populations. They are the “perfect financial response” to the shock that welfare systems experienced from the pandemic, according to a report by Maia Godemer, a research analyst for green and sustainable finance at BNEF.
The bloc raised 10 billion euros from the sale of 10-year debt, and another 7 billion euros of 20-year securities. Given the size, the EU is already nearly a fifth of the way to achieving its goal to finance its 100-billion-euro SURE program, a temporary measure designed to help governments keep workers in jobs. Italy will be the biggest beneficiary, receiving around 27 billion euros.
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