MNI INTERVIEW: ESM Issuance Gains Flexibility As Bonds Reprice

The European Stability Mechanism’s decision to drop preannounced issuance windows, in response to its move towards becoming the Single Resolution Fund backstop, will allow greater flexibility to respond to market conditions, the ESM's Head of Funding Silke Weiss told MNI.

“It allows us to react to the situations that we find in the market and what is necessary to have a successful transaction, and to prepare the market,” she said, speaking after the ESM’s EUR2 billion tap of its 2026 bond earlier this week.

The sale, which attracted EUR37 billion in orders, 18 times the no-grow issuance in a record for the ESM, employed a two-day execution process, with pricing coming a day after the announcement. This change came in response to a choppier market for bonds.

“Issuers have to deal with the market situation that we are now in, since the ECB changed the tone and the market is going through a repricing process,” Weiss said.

SHORTER END OF THE CURVE

“Investors and also issuers are trying to understand which direction things are going. There's an element of trying to find the right price, as screen prices last week were not yet really refreshed and secondary market trades happened several basis points away from what investors could see on screens,” she said.

Investor attention is currently focussed on maturities with a positive yield at the shorter end of the curve, she noted, adding that the ESM had seen broad-based interest from outside the euro area.

“That doesn't mean that other parts of the curve are closed, or anything like that. We don't see that. We try to be active on all parts of the curve. This is our strategy and continues to be our strategy,” she said.