First Eurozone bonds go on sale next year

THE Eurozone is to issue its first ever region-wide bonds in January 2011, said Klaus Regling, head of the European Financial Stability Fund (EFSF), yesterday.

Klaus said that the €440bn (£370bn) bailout fund, which was set up in May after the Greek rescue, would sell €5bn-€8bn’s worth of debt with an average maturity of 7.5 years. “If everything goes to plan they will make a profit,” he said, speaking during a visit to Singapore. The fund currently has a triple-A?rating.

The bond issue heralds an unprecedented move towards a single debt market for the Eurozone at a time when many are discussing the possibility of a euro break-up.

Peripheral Eurozone government bond yields are at record highs, but the EU?is clearly hoping that the creation of a single euro bond will send a strong signal to punitive markets.

European Central Bank President Jean-Claude Trichet said this week that markets should not “underestimate the determination of governments” to save the euro and EU officials have been anxious to demonstrate that they are prepared to consider radical measures to shore up the single currency. The comments by the EFSF’s Klaus were quickly followed by indications by the US government that it would willingly contribute to an expanded EFSF via the International Monetary Fund. “It is up to the Europeans. We will certainly support using the IMF in these circumstances,” an unnamed US official said. The euro saw its first rally since the Irish bailout after his remarks, moving over $1.31 versus the dollar.

FAST FACTS | EFSF

The European Financial Stability Fund (EFSF) is a sovereign bailout fund created in May using funds from Eurozone members.

It will issue €5bn-€8bn’s worth of bonds early next year, with average 7.5 years maturity.