EU bond sees high demand

INVESTORS scrambled to snap up a second €4.75bn (£4.1bn) bond issue by the EU yesterday, with the book oversubscribed to a value of €10bn by noon.

The European Commission, which ran the sale, said the cash will go towards boosting the Eurozone’s main bailout fund, the Financial Stabilisation Mechanism. The EC said it saw “favourable market conditions and extremely good investor demand”.

The issue takes the total value of debt sales to fund Portugal’s €78bn bailout to €19bn so far this year, a significant sum given the controversy surrounding the issue of “euro-bonds” or “e-bonds” when they were suggested last year.

The bonds auctioned yesterday have a five-year maturity and offer a coupon rate of 2.75 per cent.

Analysts said that investors were treating the bonds as “German risk plus 43 basis points”. The EU plans two more bond sales this year.

Meanwhile, the Finnish parliament voted to contribute to Portugal’s €78bn bailout yesterday, despite fears that the nationalist True Finns party could block the bill.

The sale was led by Deutsche Bank, HSBC, Société Générale and UBS as financial advisers, with eight other banks also on the deal as book-runners.