UPDATE 1-EU completes bulk of SURE funding with 14 bln euro bond sale
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds details)
May 18 (Reuters) – The European Union launched bonds on Tuesday that will complete the bulk of funding for its SURE unemployment scheme against a tough market backdrop which saw government bond yields hit multi-month highs a day earlier.
The EU will raise 14.137 billion euros from new eight and 25-year social bonds on Tuesday, Refinitiv capital markets news service IFR reported.
That completes the vast majority of its funding for the SURE scheme. The EU had planned 13 billion -15 billion euros out of a total 19 billion euros of issuance remaining for the SURE unemployment scheme during the second quarter, according to its most recent investor presentation.
Funds raised under the SURE scheme, which is one of the EU’s coronavirus recovery programmes, are directly linked to disbursements to member states ringfenced for combating unemployment.
The sale follows a big sell-off in euro area government bonds on Monday driven by speculation that the ECB may slow its pandemic emergency bond buying and concerns over Italy’s economic reform path.
That drove Italy’s bond yields to their highest in over eight months on Monday, while “semi-core” bonds including from France and supranationals like the EU underperformed benchmark German ones. Bond yields move inversely with prices.
Christoph Rieger, head of rates and credit research at Commerzbank, called the backdrop for the SURE bonds “challenging”.
The eight-year bond will price for a yield of around -0.07% and the 25-year around 0.67%, according to Reuters calculations based on the memo.
Euro zone bond markets were calmer on Tuesday, with Germany’s 10-year yield, the benchmark for the region unchanged at -0.11% at 0926 GMT.
Italian 10-year yields were down less than 1 basis point at 1.09%, keeping the closely watched risk premium over German bonds at 122 bps.
Elsewhere, Germany’s top court rejected a complaint against the European Central Bank’s conventional public sector bond purchases.
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