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European rescue fund makes 'strong' long-term bond debut

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(Globalpost/GlobalPost)

The European permanent rescue fund ESM made its debut long-term bond sale Tuesday, drawing "exceptionally strong interest" in an operation worth 7 billion euros ($9.5 billion).

The European Stability Mechanism was created in the heat of the debt crisis as the eurozone's primary crisis fighting tool and is backstopped by the single-currency bloc governments.

Major banks HSBC, J.P. Morgan and Societe Generale were lead managers for the fund's inaugural issue with more than 200 investors taking up the offer.

ESM managing director Klaus Regling said he was "very happy with the success of our inaugural bond issue".

"I expect the ESM will continue to attract a wide range of investors, who should be particularly encouraged by its robust capital structure," he added in a statement.

The five-year bond floated at a yield of 1.288 percent, giving the ESM one the lowest borrowing prices available to a government-linked institution.

Regling said that by next April the fund would have 80 billion euros in paid-in capital, "which will be the highest of any international financial institution worldwide".

The EU one year ago set up the ESM fund, which replaces the European Financial Stability Facility, to bail out eurozone members in financial distress.

The ESM shareholders are the 17 eurozone members. Its maximum lending capacity is 500 billion euros.

The ESM has been regularly issuing three- and six-month bills since January. .

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http://www.globalpost.com/dispatch/news/afp/131008/european-rescue-fund-makes-strong-long-term-bond-debut