On Thursday 18 January, the European Commission announced that it had settled its first auction through the new EU Issuance Service (EIS), which has been in operation since 1 January 2024.
The EIS is a new mechanism, developed by the Commission in June 2022, which aims to organise the settlement of Next Generation EU Recovery Plan bonds and other European Union bonds via the payment and settlement infrastructure of the euro area monetary authority: the Eurosystem.
“It creates a level playing field for all (international) central securities depositories and investors that trade EU-issued bonds”, said the European Commission in a statement on Thursday.
In practical terms, the European Central Bank (ECB) acts as paying agent, and the National Bank of Belgium (chosen by the Commission after a selection process among the national banks belonging to the Eurosystem) serves as the Central Securities Depositary (CSD) for all EU-Bonds and Bills.
According to the European Commission, this new system should optimise the settlement of short-term debt securities and bonds, notably via the TARGET2-Securities (T2S) transaction platform developed by four central banks (the Federal Bank of Germany, the Bank of Italy, the Bank of France and the Bank of Spain).
By aligning itself with the settlement process of the largest sovereign issuers in the EU, i.e. the states and central banks, and with the European Stability Mechanism (ESM), the objective of the ECB and the Commission with the EIS is to contribute to making EU debt securities more easily accessible to investors and thus further integrate the capital markets union.
The Commission, which borrows on the international capital markets on behalf of the European Union and Euratom, therefore raised €2.2 billion in short-term debt securities through this issuance service.
“The two-tranche transaction consisted of a €1.3 billion issue of a new 6-month debt security maturing in July 2024 and a €0.9 billion top-up of the 3-month security maturing in April 2024”, Brussels said in a press release.
The ECB “welcomes the go-live of the EIS, marking a new era in the efficient and robust initial distribution and settlement of debt securities using TARGET2-Securities based on the Memorandum of Understanding for the EIS”, commented Isabel Schnabel, Member of the Executive Board of the European Central Bank.
Link to the Memorandum of Understanding on the EU Issuance Service (EIS): https://aeur.eu/f/ag8
Overview of EU debt securities data: https://aeur.eu/f/ag9 (Original version in French by Bernard Denuit)