By Yoruk Bahceli
(Reuters) -The European Union launched a survey on Wednesday to identify ways to boost the trading and appeal of bonds it sells, the latest effort to get investors to treat the EU as a government borrower.
The bloc is surveying market participants to help identify ways to increase liquidity in its bonds and allow them to trade and price in ways similar to European governments, the European Commission said in a statement.
In the survey, the EU asks investors how important inclusion in government bond indexes would be to strengthen its position as a borrower comparable to European governments and whether investors would increase exposure if it were included.
Reuters reported exclusively in April that the EU was preparing to approach index providers for its debt to be included in government bond indexes, a move that would attract steady demand from a much bigger pool of global investors.
The survey also asks how important it would be to launch futures contracts tied to EU debt and for the EU to price new bonds against existing bonds as most governments do, rather than against the swaps market.
The EU has set out to raise up to 800 billion euros ($854.00 billion) in common debt by 2026 to finance a post-COVID recovery fund, in addition to an earlier pandemic scheme.
This has made it one of the world’s biggest bond issuers in less than three years.
But EU funding officials have said investors do not treat it like a government, even though it is raising joint debt with the backing of member states. This means that bonds sold by the triple-A rated EU carry higher borrowing costs than some member states. Traders say EU bonds do not offer the same liquidity as those issued by the bloc’s big governments yet.
Other questions in the survey include the importance of secondary market and repo market liquidity for investment decisions, whether the EU should sell more of its debt at auctions and whether the size of its debt is weighing on liquidity.
The survey “will help us to serve our investors even better and to improve our funding strategy and market approach further,” Johannes Hahn, the bloc’s commissioner for budget and administration, said in a statement on Tuesday.
Other EU efforts this year to raise the profile of its debt include selling the bonds backing its various programmes under a single label and preparing a framework for banks to provide investors with regular pricing quotes.
($1 = 0.9368 euros)
(Reporting by Yoruk BahceliEditing by Christina Fincher)
