The EFSF on Tuesday became the first public sector borrower to reach €3bn with a syndication since the European Central Bank began buying bonds in the sector in March.
The euro market has been in need of leadership since the ECB began its programme. The arrival of a big buyer with little concern about the price it has to pay for bonds — while on the face of it nothing for funding officials to complain of — has plunged secondary markets into turmoil, leaving borrowers without a steer on where to price new issues compared to their secondary curves.
Public sector borrowers, most notably the European Investment Bank and KfW, have been able to get size away, but not the kind of size typically associated with their benchmarks.
It was down to the EFSF, which frequently had to prove that it can borrow in choppy markets during the 2010 and 2011 eurozone sovereign debt crisis, to take a lead and show that it was possible to take down size in the currency.
While the EFSF’s bond was oversubscribed, the size of the book was not at the kind of stellar levels broadcast in the past and some might snipe that the issuer was overambitious. It could certainly have dodged the bullet of attempting a full size benchmark, and gone for a dual tranche deal to limit the size.
But instead it chose to print a 10 year euro, and to show the rest of the market just how much an issuer has to pay to get size away.
Forget the naysayers — someone had to pay the price and set a new precedent for euro market pricing. The EFSF was the best placed issuer to do that and didn’t shirk its responsibility.
It established an important marker and did a service to its peers, and the health of the eurozone public sector bond markets.