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SYNDICATION PREVIEW: EU Feb-43 Green bond

EUROZONE ISSUANCE
  • The EU will come to the market this morning to launch its second Green bond, with a long 20-year maturity (Feb-43).
  • The inaugural Green EU bond (a long 15-year maturing Feb-37) was launched on 12 October for E12.0bln with a book size of E135bln. The book size of E135bln was the third largest for any EU bln. The inaugural EU SURE bond saw a book of E145bln in October 2020 and the inaugural NGEU bond had a book of E142bln. Both the SURE and NGEU transactions were for 10-year bonds, however, which tend to see higher demand than 15 or 20-year bonds.
  • The EU has since reopened the Feb-37 Green bond once via auction on 24 January for E2.499bln with a bid-to-cover of 1.49x.
  • Demand for EU-bonds remains very strong, and with this being a green issue there is an even wider potential client base. We therefore look for very strong demand.
  • Since the launch of the NGEU bond issues, the EU has sold E79bln of non-green NGEU bonds and E14.5bln of green bonds (with green bonds eventually to make up 30% of issuance). Assuming auctions sizes remain consistent at E2.5bln, there would be E20bln available for the remaining three syndications.
  • Given these constraints, we expect to see a transaction size of E7-10bln.
  • Timing: Books tend to open between 7:45-8:00 with the final terms of the prior green syndication having been announced at 8:46. Most other transactions have seen final terms between 9:10-10:10. The last EU green transaction priced around 13:45, with most NGEU transaction pricing between 13:00-14:30. All times are UK.
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