REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Half-yearly report on the implementation of borrowing, debt management and related lending operations pursuant to Article 12 of Commission Implementing Decision C(2022)9700 1 January 2023 - 30 June 2023
Date: 2023-07-28
Institutions: Directorate-General for Budget, European Commission
Subjects: EU aid, EU borrowing, EU financing arrangements, EU strategy, Ukraine, debt, economic recovery, financial management, macro-financial assistance

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.7.2023  COM(2023) 461 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Half-yearly report on the implementation of borrowing, debt management and related lending operations pursuant to Article 12 of Commission Implementing Decision C(2022)9700                              1 January 2023 - 30 June 2023                        
 
 
Table of Contents 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

Introduction .................................................................................................................. 1 

Implementation of borrowing operations in first half of 2023 ..................................... 2 

Cost of funding and liquidity balances......................................................................... 5 

Other milestones in H1 2023 ........................................................................................ 6 

Steps to further develop the ecosystem of EU-Bonds .................................................. 7 

Issuance outlook for the second half of 2023............................................................... 8 

Conclusion.................................................................................................................... 9 

Annex: EU Funding Strategy – Objectives, Means and Implementation indicators................ 10 

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1.  Introduction 

The Commission has been borrowing funds on behalf of the European Union for over 40 years. 
In  the  past  3  years,  the  EU  has  seen  a  profound  transformation  of  its  presence  in  and  use  of 
such  as  SURE1, 
European  capital  markets  as 
NextGenerationEU, and Macro-Financial Assistance (MFA)+ for Ukraine. The EU currently has 
just  over  EUR  400  billion  in  outstanding  liabilities  resulting  from  its  bond  issuance,  of  which 
about EUR 370 billion have been issued since 2020. 

large  programmes 

implements 

it 

The Commission needed a completely new play-book to successfully finance bond-issuances on 
this  scale.  When  it  set  up  NextGenerationEU,  it  drew  up  a  diversified  funding  strategy  of  the 
type implemented by the largest euro-area sovereign issuers. In line with the best practices used 
by these issuers, the diversified funding strategy uses different funding instruments (EU-Bonds 
and EU-Bills) and funding techniques (syndications and auctions) to cover long-term and short-
term funding needs. 

The  scope  of  the  diversified  funding  strategy  was  expanded  in  December  2022  to  enable  the 
Commission  to  extend  the  benefits  of  this  more  flexible  and  cost-efficient  debt  management 
strategy  to  MFA+  for  Ukraine  and  other  potential  future  borrowing  and  lending  programmes, 
thereby  creating  a  unified  funding  approach  for  all  EU  borrowing  and  lending  programmes. 
Under  this  unified  funding  approach,  the  Commission  issues  single-branded  EU-Bonds,  as 
opposed to running separately designated issuances per policy as in the past. 

Box 1: Use of proceeds of EU Bond issuance 

Under NextGenerationEU (NGEU), the Commission can raise up to EUR 806.9 billion between mid-
2021 and 2026 through the issuance of EU-Bonds, making the EU one of the largest issuers of euro-
denominated debt in this period. To date, more than EUR 183 billion has been disbursed: EUR 153.4 
billion to Member States under the Recovery and Resilience Facility (RRF) and EUR 29.8 billion to the 
EU budget. Member States are currently revising their recovery and resilience plans to, among others, 
reflect the revised non-reimbursable support allocation, request additional loans if they wish, or adjust 
to new priorities and additional funding opportunities, under REPowerEU. The revision of these plans 
will lead to an increased take-up of NGEU loans. Upon submission, these plans must be assessed by 
the Commission and then approved by the Council. 

In addition, in 2023, the EU is providing up to EUR 18 billion in highly concessional MFA+ loans to 
Ukraine. These will be disbursed in regular instalments covering around half of Ukraine’s short-term 
funding needs for 2023 as estimated by the Ukrainian authorities and the International Monetary Fund. 
In  the  first  half  of  2023,  EUR  9  billion  has  already  been  disbursed  to  Ukraine  under  the  MFA+ 
programme.  

On 20 June 2023, the Commission proposed setting up a dedicated financing instrument for Ukraine 
with up to EUR 50 billion in grants and loans for 2024-2027. It is anticipated that EUR 33 billion will 
take  the  form  of  loans,  to  be  financed  by  EU-Bond  issuance  commencing  in  2024  subject  to  the 
agreement European Parliament and Council. 

1 The European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE). 

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This half-yearly report, produced in line with Article 12 of Commission Implementing Decision 
C(2022)9700  reviews  the  first  6  months  of  implementation  of  the  unified  funding  approach.  It 
does not evaluate how the proceeds have been used, including for green expenditure, as that will 
be covered in separate reports under the Regulations for each instrument. It also looks into the 
steps that the Commission is taking to further develop the EU-Bonds ecosystem – with the aim 
of increasing the liquidity of EU-Bonds and facilitating a market treatment that reflects the EU’s 
issuance volumes and credit strength. Finally, it provides an outlook for EU-Bond issuance in the 
second half of 2023. 

The  annex  to  this  report  also  presents  the  overarching  debt  management  strategy  guiding  the 
Commission’s implementation of the unified funding approach. The Commission formulated this 
in  response  to  a  recommendation  from  the  European  Court  of  Auditors  (ECA)  calling  for  the 
formulation of such a strategy and the specification of indicators that can be used to monitor its 
implementation. The objectives and means underpinning the strategy are presented in the annex, 
along with the indicators that the Commission will use to monitor its implementation. 

The  half-yearly  report  is  part  of  a  regular  flow  of  information  to  Parliament  and  the  Council, 
providing transparency and accountability on the implementation of the EU’s debt management 
operations.  With  the  diversified  funding  strategy  becoming  the  central  approach  for  EU 
borrowing and lending operations in the Financial Regulation, this report and all future reporting 
is  being  prepared  in  accordance  with  Article  220a  of  the  Financial  Regulation,  which  requires 
regular  and  comprehensive  reporting  on  all  aspects  of  EU’s  borrowing  and  debt  management 
strategy. 

2.  Implementation of borrowing operations in first half of 2023 

In the first half of 2023 the Commission continued to pursue its objectives of raising funds in the 
markets in an effective and efficient way by applying its unified funding approach. In doing so 
the Commission was able, despite market volatility, to meet all of its disbursement commitments 
under NextGenerationEU and MFA+ on time. At the same time, issuance amounts and maturities 
remained within the pre-set parameters, and financing terms were in line with those of an issuer 
of the EU’s size and favourable rating. The sections below present some of the key components 
of the Commission’s borrowing and lending operations in the first half of 2023. Further details 
on the execution of the Commission’s funding strategy during that period are given in the Annex. 

Execution of funding plan for the first half of 2023 
In December 2022, the Commission announced its funding plan for January to  end-June 2023. 
This  was  the  first  funding  plan  that  covered  not  only  NextGenerationEU,  but  also  other 
borrowing and lending programmes, notably MFA+ for Ukraine.  

In the first half of 2023, the Commission announced long-term funding operations of up to EUR 
80  billion  and  eventually  issued  EUR  78  billion  in  EU-Bonds,  with  an  average  maturity  of 
around 14 years. The Commission used a mix of syndications (60%) and auctions (40%). The 15 
transactions were spread over the full six months to ensure a regular presence in the market. In 
the first half of 2023 (H1 2023), a higher number of transactions was implemented than  in the 
second half of 2022, reflecting the higher funding target in H1 2023 (up to EUR 80 billion in H1 
2023  vs.  EUR  50  billion  in  H2  2022).  Transactions  were  also  of  lower  average  size  given  the 
challenging and volatile market conditions prevailing in the first half of 2023. 

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The  transactions  in  the  first  six  months  of  2023  have  brought  the  total  outstanding  amount  of 
EU-Bonds  to  just  over  EUR  400  billion  of  which  over  EUR  44  billion  were  raised  by  issuing 
NGEU  green  bonds.  In  the  first  half  of  2023,  the  Commission  raised  EUR  7.732  billion  by 
tapping  two  existing  green  bonds.  These  two  transactions  increased  the  outstanding  amount  of 
these  two  bonds  and  thereby  contributed  to  building  a  highly  liquid  NextGenerationEU  green 
bond curve in what is set to be the biggest green bond programme worldwide.  

In the first half of 2023, the Commission also issued 3-month and 6-month EU-Bills through bi-
monthly  auctions  to  meet  short-term  funding  needs,  with  EUR  18.7  billion  in  EU-Bills 
outstanding at  the  end of June 2023. Twelve auctions were used to  issue 24 EU-Bills,  with  an 
average size of around EUR 1 billion each.  

Disbursements 
On  the  back  of  these  transactions,  the  EU  has  been  able  to  continue  the  smooth  funding  of 
Member  States’  recovery  and  resilience  plans  through  timely  disbursement  of  proceeds.  The 
Commission  made  all  disbursements  to  Member  States  under  the  Recovery  and  Resilience 
Facility  as  soon  as  they  fell  due,  on  average  within  6  working  days  of  authorisation  of  the 
disbursement. There were no delays.  

In the first half of 2023, the Commission disbursed EUR 14.7 billion to Member States under the 
RRF. Of this, EUR 12.7 billion was in the form of non-reimbursable support and EUR 2.0 billion 
in the form of loans. The Commission also transferred, in the first half of 2023, EUR 6.9 billion 
to  the  EU  budget  to  contribute  to  programmes  such  as  Horizon  Europe,  InvestEU  Fund, 
ReactEU,  the  EU  Civil  Protection  Mechanism  (RescEU),  the  European  Agricultural  Fund  for 
Rural Development (EAFRD), and the Just Transition Fund. 

Overall, since the start of NextGenerationEU in the summer of 2021, the Commission has made 
EUR 184.2 billion available: EUR 153.4 billion non-reimbursable support and loans for Member 
States (EUR 106.3 billion in non-reimbursable support and EUR 47.1 billion in loans) under the 
Recovery and Resilience Facility and EUR 30.9 billion for the other NextGenerationEU-funded 
spending programmes. 

In  addition  to  these  disbursements  for  NextGenerationEU,  in  the  first  half  of  2023,  the 
Commission disbursed EUR 9 billion to Ukraine under the MFA+ programme, funded by bond 
issuance  under  the  unified  funding  approach.  Overall  in  the  first  half  of  2023  the  Commission 
disbursed a total of around EUR 30 billion for NGEU and Ukraine MFA+ combined. The pace 
of NGEU disbursements has been influenced by the ongoing revision of recovery and resilience 
plans  by  the  Member  States.  According  to  the  legal  framework,  Member  States  have  until 
August 2023 to request additional loans and the Commission must commit the remaining 30% of 
the non-reimbursable support and additional loans by the end of 2023. At the same time, the new 
REPowerEU priorities, with the additional resources, need to be reflected as well. All Member 
States are therefore focusing their efforts to revise their plans to meet these legal deadlines and 
new priorities. 

Investor demand and secondary market liquidity 
Despite  the  volatility  in  rates  observed  over  the  period,  transactions  continued  to  enjoy  strong 
market  support,  with  syndicated  transactions  in  the  first  half  of  2023  being  between  6  and  15 

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times oversubscribed. The EU benefits from a well-balanced and diversified investor base with a 
good representation of different types of investors from all across the world2. 

This  strong  support  is  reflected  in  consistently  low  new  issue  premiums  (NIPs)3  demanded  by 
investors as a concession when the EU issues bonds through syndication. NIPs were somewhat 
lower than in the second half of 2022. For the funding operations in the first half of this year, the 
average new issue premium  was slightly below 2 basis points, with the lowest  at  1 basis point 
and the highest at 3 basis points. The modest level of the price concession at issuance reflects the 
fact that the EU remained a regular, predictable issuer throughout this period. This, coupled with 
the  continued  strong  demand  from  investors,  is  a  sign  of  trust  from  the  markets,  and  provides 
confidence that the EU can continue to place its bonds successfully. 

Quarterly  secondary  market  turnover  of  EU  and  European  government  bonds  (%  of 
outstanding volume) 

70%

60%

50%

40%

30%

20%

10%

0%

1

2

3

4

1

2

3

4

1

2

3

4

1

2020

2021

2022

2023

EU market

EGB market* (average 2020-2022)

Source: European Commission based on Bloomberg data.  
Note:  European  government  bond  (EGB)  market  here  comprises  euro-area  sovereigns,  the  European  Financial 
Stability Fund (EFSF) and the European Stability Mechanism (ESM).  
Data for this market was not available for Q1 2023. 

2 To date, EU issuances have in total attracted more than 1600 different investors from 70 different countries. About 
65% of investors are located in the EU, more than 20% are international investors operating from the UK, and the 
remainder are other international investors, mainly based in Asia. Almost 70% of the EU-Bonds issued have been 
going to buy-and-hold investors (i.e. fund managers, insurance companies, pension funds and central banks). There 
is also a good representation of investors demanding different maturities. Central banks and bank treasuries (which 
usually  prefer  to  invest  in  maturities  up  to  10  years)  account  for  about  45%  of  purchases  of  EU-Bonds  in  the 
primary markets, while pension funds and insurance companies (which prefer maturities above 10 years) account 
for almost 15%. 

3 This new issue premium (NIP) is a premium that the issuer pays in order to persuade investors to buy its bonds in 

the primary market rather than in the secondary market.  

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Secondary market liquidity of EU-Bonds also remained on par with that observed in the markets 
for European government bonds (EGBs), relative to the amounts outstanding. This liquidity was 
boosted in the first half of 2023 by the extensive tapping of existing funding lines, with 70% of 
the  funding  volume  mobilised  via  taps.  New  funding  lines  were  also  launched  to  provide  the 
market with new benchmark lines. 

3.  Cost of funding and liquidity balances 

Cost of funding 
In  the  first  half  of  2023,  interest  and  debt  management  costs  increased  in  line  with  general 
market  conditions.  The  cost  of  funding4  for  January  to  June  2023  is  estimated  to  be  close  to 
3.2%, compared to 2.6% in the previous semester. 

increased  from  0.09%  at 

Since the start of 2022, the pace of increase in interest rates for all issuers including the EU has 
been one of the steepest witnessed in financial markets in the past decades. Interest rates on 10-
year  EU-Bonds  have 
inaugural  10-year 
NextGenerationEU  bond  in  June  2021  to  1.53%  in  May  2022,  2.82%  in  November  2022,  and 
3.05% in the most recent issuance in June 2023. Comparable increases have been observed for 
highly-rated euro-sovereign issuers. For example, interest rates on 10-year German government 
bonds increased from around -0.20% in June 2021 to close to 1.0% in May 2022, 2.56% at the 
end of December 2022, and 2.39% in June 2023. To address the unprecedented sharp increase in 
borrowing  costs,  the  Commission  proposed  as  part  of  the  mid-term  review  of  the  multiannual 
framework  2021-2027  to  establish  a  special  instrument  exclusively  to  cover  the  interest  costs 
overrun.5 

time  of 

the 

the 

The  yields  on  EU-Bonds  have  been  consistently  higher  than  those  paid  by  large  sovereign 
issuers,  despite  the  enhanced  liquidity,  high  creditworthiness,  and  steady  supply  of  EU-Bonds. 
The  divergence  between  yields  on  EU-Bonds  and  those  of  large  sovereigns  can  largely  be 
explained  by  the  established  market  convention  of  pricing  EU-Bonds  against  the  swap  curve. 
Recent  analysis  by  Bruegel6  showed  that  the  swap-pricing  is  the  main  driver  for  most  of  the 
premium paid by EU and other similarly priced issuers to EGBs with some indications that this 
this factor accounts for 90% of the premium. 

Movements in the swap curve relative to the price of large sovereigns are driven by a range of 
technical and structural factors unrelated to the underlying quality of the bonds or efficiency of 
EU’s issuance programme. Foremost amongst these considerations is the investor preference for 
established  sovereign  bonds  which  can  be  used  readily  and  cheaply  as  collateral,  a  preference 
which is accentuated in times of market stress. These factors were very much in play towards the 

4 The interest costs incurred are allocated to the budget and the Member States  receiving loans in accordance with 
the  methodology  set  out  in  Commission  Implementing  Decision  (EU)  2021/1095  and  its  successor  (EU) 
2022/9701. This methodology distinguishes between three different cost categories: (i) cost of funding to finance 
non-reimbursable  support  and  loan  disbursements  calculated  for  six-monthly  time  compartments,  (ii)  cost  of 
holding and managing liquidity, and (iii) administrative costs. 

5 See for more information: Documents (europa.eu) 
6 EU borrowing costs: Drivers and dynamics in times of rising rates (europa.eu) 

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end of the first quarter, following banking turmoil in the US and the take-over of Credit Suisse 
by  UBS  in  Europe.7  As  financial  stability  fears  receded,  the  spread  between  sub-sovereign  or 
supranational  bonds  (SSA)  and  European  government  bonds  returned  to  levels  observed  at  the 
start of the semester. The spread of 10-year EU-Bonds versus 10-year German bunds stood at 62 
basis points  at  30 June 2023, down from  a peak of 83 basis points in March 2023, and in  line 
with levels seen at the start of the semester. 

In order to  bring the pricing of EU-Bonds into line with  the underlying  volumes, liquidity and 
creditworthiness  of  the  programme,  the  Commission  is  taking  steps  (see  Section  5)  to  create 
conditions  conducive  to  the  trading  and  pricing  of  EU-Bonds  similar  to  that  of  large,  liquid 
sovereign  issuers.  Achieving  this  result  also  depends  on  market  participants  adapting  their 
conventions and assessment of EU-Bonds. While there are encouraging signs that this change is 
underway, it may take time. 

Liquidity management 
The Commission maintained a regular and predictable presence in financial markets in line with 
the funding plan announced in December 2022, with planned dates for auctions and syndications. 
However,  cash  outflows  were  slower  than  initially  planned,  leading  to  higher  average  cash 
holdings in the first half of 2023, averaging EUR 36.8 billion compared to EUR 25.1 billion in 
the previous semester. The Commission reduced its cash intake through Bill issuance to ensure 
continued market presence while minimising the increase in cash balances.  

The higher amounts of liquidity holdings did not translate into material costs for the programmes 
supported.  These  amounted  to  EUR  23.3  million  on  the  cash  holdings  from  January  to  June 
2023. These costs will be shared proportionately between the EU budget and loan beneficiaries 
at the end of 2023. 

4.  Other milestones in H1 2023 

On 12 June 2023, the European Court of Auditors published the findings of its special report on 
the  NextGenerationEU  debt  management  operations.  In  this  report,  the  ECA  assessed  whether 
the  Commission  had  developed  effective  systems  to  manage  the  debt  raised  to  finance 
NextGenerationEU.  The  report  provides  a  comprehensive  review  of  the  setting  up  and 
management  of  EU’s  funding  operations  to  date,  accompanied  by  useful  recommendations  for 
future actions.  

The ECA concluded that ‘the Commission quickly developed a debt management system which 
allowed the funds required for NextGenerationEU to be borrowed in a timely fashion (…)’ and 
that  ‘(…)  borrowing  costs  reflected  the  Commission’s  market  position.  The  Commission  also 
met all key regulatory requirements concerning debt portfolio and risk management.’ 

The  report  also  included  five  recommendations  for  further  improvements  in  the  Commission’s 
debt management: (i) establishing a separate middle-office function; (ii) reinforcing the role of 

7 Risk-off moves generally tend to lead to a strong re-allocation to traditional safe-haven assets, such as government 

bonds, hence leading to the SSA-EGB spread to widen. 

6 

 
 
 
 
                                                 
the  Chief  Risk  Officer;  (iii)  implementing  a  workforce  strategy;  (iv)  formulating  clear  debt 
management  objectives  and  related  indicators;  and  (v)  ensuring  consistency  on  internal 
documentation.  

The  ECA  recommendations  are  welcome  input  to  the  Commission’s  efforts  to  improve  its 
standing  on  capital  markets  (see  Section  5  below).  The  Commission  is  already  working  to 
implement these recommendations in a timely manner.  

The  present  report  already  responds  to  ECA’s  fourth  recommendation,  which  calls  for  the 
elaboration  of  an  overarching  debt  management  strategy  to  inform  the  Commission’s 
implementation  of  its  unified  funding  approach.  The  annex  to  this  report  presents  such  a  debt 
management strategy, starting from the primary objectives that guide it, and the manner in which 
the key levers at the Commission’s disposal are implemented. The strategy is supported by a set 
of indicators which will be used to monitor the way in which the strategy is implemented. These 
indicators will be updated and commented upon in future editions. 

5.  Steps to further develop the ecosystem of EU-Bonds 

The establishment of a unified funding approach as of January 2023 represented a key milestone 
in  building  a  robust  framework  for  meeting  the  EU’s  funding  needs  as  efficiently  as  possible. 
This approach allows the Commission to plan, execute and communicate all issuances in an agile 
and  coherent  way,  under  a  common  risk,  compliance,  and  governance  framework  for  all 
borrowing operations. 

Nevertheless, despite this ongoing transformation of the EU as an issuer and the gradual shift in 
the  treatment  of  EU-Bonds8,  markets  continue  to  treat  and  price  EU-Bonds  against  the  swap 
curve.  In  order  to  support  a  transition  towards  a  pricing  method  that  better  reflects  the 
fundamentals  of  EU  issuances,  the  Commission  is  taking  a  number  of  actions  to  support  the 
evolution and liquidity of EU-Bonds.  

To facilitate the trading of EU-Bonds in the secondary market, in Q4 2023, the Commission will 
implement  a  framework  for  providing  investors  with  pricing  quotes  on  EU  securities.  The 
framework  will  be  implemented  via  the  EU  primary  dealers  who  will  provide  these  quotes 
through  widely-used  trading  platforms,  thereby  enhancing  the  price  discovery  of  the  EU 
securities  and  reducing  uncertainty  on  trade  execution  for  dealers  and  investors.  This  quoting 
system will enable  investors  to  trust  that the market  prices  quoted for EU securities on trading 
platforms  are  reliable  and  supported  by  the  EU’s  primary  dealers.  The  Commission  Decision 
establishing the Primary Dealer Network has been amended to establish these new arrangements. 
These arrangements will take effect in the autumn and be used as part of the system for selecting 
primary dealers to be given lead and co-lead mandates from next year. 

8 For example, the re-assignment of EU-Bonds to haircut category I, the same as used for debt instruments issued by 

central governments, in the ECB’s risk control framework for credit operations as of 29 June 2023. 

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In addition, the Commission has started to make preparations for a repurchase (‘repo’) facility to 
support market participants in trading its bonds. Through the repo facility, the Commission will 
make its securities  available on a temporary basis, thus  helping EU  primary  dealers to  provide 
liquidity in EU-Bonds. The Commission first needs to acquire and build the capacities required 
to implement such a repo facility, which will be operational mid-2024. 

The Commission is also continuing its active engagement with market participants to identify the 
most  effective  way  of  further  enhancing  the  liquidity  of  EU-Bonds  and  to  allow  them  to  be 
traded and priced in ways similar to European government bonds. To that effect, in June 2023, 
the Commission launched its inaugural investor survey, which sought investor feedback on the 
role  of  EGB  indices  as  benchmarks  in  investors’  investment  decisions  and  on  the  perceived 
relevance of the inclusion of EU-Bonds in such indices. The Commission is also continuing to 
look at ways to improve the use of EU-Bonds as collateral in bilateral secured transactions. 

Progress is also being made in the implementation of the EU issuance service (EIS), which will 
go  live  in  early  January  2024.  With  this  service,  the  Commission  will  move  from  using  a 
settlement system comprising commercial suppliers of settlement services to a Eurosystem-based 
settlement infrastructure for EU-Bonds issued after this date. EU-Bonds settled through the EIS 
will  benefit  from  integration  into  the  Eurosystem  payment  and  settlement  infrastructure 
(Target/Target2S)  –  as  European  government  bonds  –  facilitating  their  use  as  collateral  in  the 
Eurosystem.  

6.  Issuance outlook for the second half of 2023 

On 28 June 2023, the Commission issued its half-yearly funding plan for July to end-December 
2023. In the second half of 2023, the Commission intends to issue EUR 40 billion in EU-Bonds, 
complemented  by  short-term  EU-Bills.  The  Commission  will  use  these  funds  to  finance 
NextGenerationEU  (including  possible  payments  under  REPowerEU)  and  MFA+  for  Ukraine. 
Further  issuances  on  a  much  smaller  scale  are  also  possible  under  existing  MFA  and  ESM 
programmes. 

While  new  issuance  to  support  Ukraine  through  the  Ukraine  Finance  Facility  will  involve 
additional issuance to provide further loans to Ukraine, this issuance will only start in 2024 once 
the legislation establishing the Facility has been adopted.  

The  funding  target  for  the  second  half  of  2023  reflects  the  expected  disbursement  needs  of 
various  beneficiaries,  notably  EU  Member  States  under  the  Recovery  and  Resilience  Facility. 
Currently, Member States  are revising their  recovery and resilience plans to  reflect  the revised 
non-reimbursable  support  allocations,  request  additional  loans  if  they  wish,  or  adjust  to  new 
priorities  and  additional  funding  opportunities,  under  REPowerEU.  Against  this  background,  a 
bond  issuance  of  EUR  40  billon  will  enable  the  EU  to  raise  the  required  amounts  while 
maintaining a regular market presence throughout the second half of the year. 

8 

 
 
 
 
7.  Conclusion 

In  the  first  6  months  of  2023,  the  unified  funding  approach  enabled  the  Commission  to  raise 
close to EUR 80 billion for NextGenerationEU and MFA+ for Ukraine at rates commensurate to 
its standing in the market. As of 30 June 2023, almost EUR 250 billion has been raised under the 
unified funding approach to finance NextGenerationEU and MFA+ to Ukraine. The availability 
of  large  balances  heading  into  the  second  half  of  the  year,  combined  with  a  temporary  slow-
down in the pace of disbursements as Member States revise their recovery and resilience plans, is 
reflected in lower programmed bond issuance (EUR 40 billion) in the second half of the year.  

During  the  first  half  of  2023,  interest  rates  rose  slightly,  not  only  for  the  EU  but  for  all 
(sovereign)  issuers.  The  pace  of  increase  is  slower  than  last  year,  and  rates  have  started  to 
stabilise as markets expect that much of the central-bank rate-hiking needed to tame inflation has 
been  completed.  The  period  has  seen  considerable  volatility  in  response  to  changing  market 
expectations  about  further  rate  increases.  EU  bond  issuance  was  met  with  strong  and  steady 
investor demand through this period, despite the backdrop of market volatility. 

The market convention whereby the EU is priced against the swap curve results in the EU paying 
a premium above the rates paid by sovereign EGB issuers. This has exacerbated the underlying 
increase in  market  rates.  The new unified funding  approach for the issuance of EU-Bonds is  a 
major  step  forward  in  consolidating  the  EU’s  market  presence.  However,  the  Commission  is 
taking further steps to encourage pricing of EU-Bonds in line with that of bonds of highly rated 
sovereign issuers so as to reduce the premium it pays on its issuance. These measures include  a 
price quoting system to become operational this autumn and the establishment of a repo facility 
(mid-2024). It is also encouraging the market to improve the use of EU-Bonds as collateral and 
recognise them as deserving of inclusion in sovereign bond market indices. 

The conclusions and recommendations in the ECA special report on the NextGenerationEU debt 
management  operations  are  welcome  inputs  for  the  Commission’s  efforts  to  improve  the  EU’s 
standing  in  euro-capital  markets.  The  Commission  is  already  working  to  implement  the 
recommendations in a timely manner, with the objectives and indicators described in the annex 
to this report as a first step.  

9 

 
 
 
 
 
 
 
Annex: EU Funding Strategy – Objectives, Means and Implementation indicators 

Purpose of this annex 
This  annex  frames  the  primary  objectives  that  guide  the  Commission’s  implementation  of  its 
diversified  funding  strategy  to  finance  all  EU  borrowing  and  lending  programmes  (i.e.  the 
unified  funding  approach).  It  presents  a  series  of  indicators  for  tracking  the  implementation  of 
key  aspects  of  the  strategy,  namely  bond  issuance,  bill  issuance,  liquidity  management,  and 
communication. 

Objectives of EU funding 
The Commission is empowered by the EU legal framework to borrow from international capital 
markets on behalf of the EU for the implementation of specific EU programmes. The legislation 
setting  up  these  programmes  specifies  the  amounts  and  time-frames  within  which  amounts 
should  be  raised,  and  lays  down  rules  on  the  use  of  proceeds.  In  raising  funds  within  this 
framework, the Commission has two primary objectives: 

  Effectiveness: Ensuring that the EU is able to meet commitments under the related financial 

assistance programmes as they fall due for payment.  

  Efficiency: Obtaining the most advantageous financial conditions for the EU in the medium 

to long run: 

through the sound planning and smooth execution of transactions,  
by obtaining the best possible terms in the prevailing market conditions, 

i. 
ii. 
iii.  while staying within the risk bearing capacity of the EU budget as set, notably, by the 
available budgetary cover for the relevant operations and within the risk management 
framework for EU financing operations, as set out in the Commission’s high-level risk 
and compliance Policy.9  

To meet these objectives, in 2021, the Commission put in place a diversified funding strategy for 
the  financing  of  NextGenerationEU  (Commission  Implementing  Decision  C(2021)2502)  as 
described in the main report.  

The overarching aim is to create and maintain a complete and highly liquid yield curve across all 
benchmark maturities which provides investors with an accessible and reliable financial asset for 
investing and trading. This, in turn, ensures the most advantageous funding conditions for the EU 
as an issuer while ensuring a proper management of the related risks.   

The means to achieve the objectives 
In  implementing  its  funding  approach,  the  Commission  aims  to  make  best  use  of  all  elements 
that  are  under  its  control  with  a  view  to  achieving  its  primary  objectives  of  efficiency  and 
effectiveness. These elements span over five main dimensions:  

9 NGEU High Level Risk and Compliance Policy (europa.eu)  

10 

 
 
 
 
 
 
 
 
 
                                                 
a)  The EU-Bond programme: The Commission organises its bond issuance by making use 
of all benchmark maturities across the curve (up to 30 years). In choosing the appropriate 
tenors for the issuances, the Commission must ensure that the resulting future redemption 
levels  remain within the levels  needed to  protect  the EU budget  headroom  ceilings and 
EU’s credit rating. At the same time it pays close attention to investor preferences and to 
the profile of outstanding bonds, as it supplies the market on a regular basis with a well-
balanced  set  of  maturities.  In  organising  the  issuance,  the  Commission  uses  syndicated 
transactions and auctions. The different formats have different features but a suitable mix 
of  the  two  is  sought  for  the  successful  execution  of  the  funding  programmes.  As  the 
issuance programme becomes firmly established, the use of auctions for bond issuances 
should continue to evolve and grow over time to levels comparable to that of sovereign 
issuers  of  the  same  calibre  as  the  EU  and  with  due  respect  to  market  conditions  and 
financing needs.  

b)  The  EU-Bill  programme:  The  Commission  implements  a  programme  of  EU-Bills  that 
provides the EU with access to the money market (maturities up to 1 year via auction). 
This programme is used as an essential risk management tool to maintain sufficient levels 
of cash at all times and to cope with unpredictable financial market conditions or funding 
needs. 

c)  Liquidity  management:  The  Commission  takes  a  prudent  approach  to  internal 
management  of  cash  flows,  which  ensures  that  all  payment  commitments  are  honoured 
on  time  and  avoids  liquidity  shortfalls.  It  also  endeavours  to  manage  liquidity  balances 
based on forecast disbursements to keep liquidity balances in line with needs and to limit 
any real or opportunity costs arising from the balances. 

d)  Primary Dealer Network: A successful implementation of the funding strategy requires 
support from a strong Primary Dealer Network, which is able to distribute the issuances 
to a global investor base and manage and warehouse the financial risks related to auctions 
and  syndications.  The  Commission  seeks  to  keep  its  Primary  Dealer  Network  open,  to 
enable a wide range of financial institutions to  participate. At  the same time, it  aims to 
sustain  competition  and  leverage  skills  within  the  group  to  help  ensure  the  successful 
implementation  and  development  of  the  funding  strategy,  including  supporting  the 
secondary market liquidity of EU issuances. 

e)  Communication with diverse market stakeholders and peer issuers: The Commission 
ensures  regular,  timely  and  open  communication  with  market  participants  which  is  a 
precondition  for  remaining  a  reliable  and  trusted  issuer.  The  Commission  therefore 
communicates  transparently  on  aspects  of  its  funding  plans  and  the  execution  of  the 
funding  transactions.  The  six-monthly  funding  plans  constitute  the  mainstay  of  this 
communication, announcing target amounts and dates for syndications and auctions over 
the  subsequent  6  months.  Through  consistent,  effective  communication  around  its 
activities  as  a  regular,  large-scale  issuer,  the  EU  seeks  both  to  deepen  its  investor  base 
and broaden it (geographically). Through pro-active investor relations management, the 
Commission  builds  and  maintains  trust  with  its  investor  base  and  obtains  a  thorough 
understanding of their needs.  

Implementation  of  the  above  activities  is  supported  by  a  set  of  controls,  comprising  two 
organisationally  independent  ‘lines  of  defence’.  These  enable  transactions  to  be  executed  and 
settled  efficiently  and  help  frame  the  behaviour  of  all  parties  involved  in  the  programme 

11 

 
 
implementation. The ex ante and ex post controls also ensure that EU issuances are carried out in 
line with the governance and take account of prevailing market conditions. 

Final considerations 
The  programme’s  key  levers  enable  the  EU  to  make  best  use  of  its  high  credit  rating  while 
providing  investors  with  a  regular  and  predictable  sequence  of  sizeable  issuances.  This  in  turn 
creates a platform for the EU to attract strong demand from investors with a low risk appetite and 
large  investment  needs,  and  from  investors  with  regulation-driven  investment  needs  (central 
banks, bank treasuries, asset managers, pension funds and insurance companies).  

Table 1 below presents some indicators that can be considered when tracking the Commission’s 
implementation  of the five core elements  of the EU’s funding approach  and hence its progress 
towards its overarching effectiveness and efficiency objectives. The Commission will report on 
these indicators in its half-yearly report on the implementation of borrowing, debt management 
and  related  lending  operations  pursuant  to  Article  12  of  Commission  Implementing  Decision 
C(2022)9700 and will comment on any observed noteworthy developments. 

By  conducting  the  above  activities  proficiently,  the  Commission  can  deliver  the  most  cost-
effective outcomes from its issuance on behalf of beneficiaries, including the EU budget, which 
bears  the  costs  for  non-reimbursable  support  financed  by  loans.  The  cost  of  funding  for  EU 
issuance,  calculated  on  the  basis  of  the  weighted  average  of  its  funding  transactions,  is 
determined predominantly by factors beyond the EU’s control – principally, wider market rates 
but currently also movements in the swap curve relative to the market rate. The absolute cost of 
funding  for  EU  operations  is  therefore  impacted  mainly  by  factors  other  than  the  efficient  and 
effective  implementation  of  the  unified  funding  approach.  However,  sustained,  effective 
implementation is important for the EU’s standing in the market and for its efforts to  gradually 
bring the trading and pricing of EU-Bonds more in line with the processes used for liquid EGB 
sovereigns. It is for this reason that a cost metric is not considered to be an appropriate indicator 
for  assessing  the  Commission’s  use  of  the  means  under  its  control  for  achieving  the  primary 
objectives of efficiency and effectiveness. 

Even though they are not indicators that can be influenced by the way that the Commission uses 
the levers at its disposal under the funding strategy, information on volumes and costs is clearly 
of  central  importance  to  understanding  how  the  funding  programme  is  evolving.  The 
Commission will therefore include information on overall volumes and average cost of funding 
in its half-yearly reports.  

It  is  recalled  that  the  dimensions  of  the  borrowing  and  debt  management  operations  to  be 
undertaken  are  set  out  in  the  Commission’s  annual  borrowing  decision  and  accompanying  bi-
annual  funding  plans,  which  limits  the  overall  exposure  of  the  EU’s  budget  and  of  loan 
beneficiaries.10

10 C_2022_9702_F1_COMMISSION_IMPLEMENTING_DECISION_EN_V7_P1_2416109.PDF (europa.eu) 

12 

 
 
 
 
 
 
 
                                                 
Table 1: Implementation indicators on the use of the means for delivering against the Commission’s efficiency and effectiveness objectives 

Means 

Indicator 

1)  Implementation 
of the EU-Bond 
programme 

i.  Maturity split 

of issuance 
programme 

ii. 

Timely 
distribution of 
issuances 

iii.  Green 

issuances11 

a)  Regular issuances 
across the curve 
Regular EU-Bond 
(and NGEU green 
bond) issuances in all 
maturities across the 
curve (up to 30 
years) to provide 
different types of 
investors with 
investment 
opportunities as way 
of maintaining strong 
investor demand and 
thus the flexibility to 
determine issuance 
volumes and 
maturities for 
individual 
transactions based on 
market conditions. 

Value in H1 2023 
(unless indicated 
otherwise) 

1-4 years: 22% 
4-8 years: 15%  
8-12 years: 17% 
12y-17 years: 11% 
17-23 years: 16% 
23-31 years: 19% 
7 syndications and 8 
bond auctions, 
resulting in 2-3 
issuances per month. 

Approximately EUR 
8 billion through taps 
of 2048 and 2033 
bonds. 

Commentary on execution in H1 2023 

In H1 2023 the Commission pursued its objective through regular 
bond issuances across different tenors to provide the EU curve with 
liquidity on all segments. The funding transactions were spread 
over the full semester to ensure a regular presence in the market. 
Over the semester, a greater number of transactions were made than 
in the previous semester due to a) the H1 2022 funding target of up 
to EUR 80 billion (compared with EUR 50 billion in H1 2022) and 
b) the lower average size of transactions in light of the challenging 
and volatile market conditions when the funding plan for the first 
half of 2023 was drawn up. 

While ensuring a presence in all benchmark maturity buckets, the 
issuances were, on average, geared slightly towards the long-end of 
the curve (with an average maturity of issuances of 13.5 years), in 
light of the need to spread redemptions over time but also stronger 
demand from investors for long-dated EU-Bonds. 

Green bond issuances were also maintained albeit at a lower level 
than in past semester, in tune with cumulative reported green 
expenditures by Member States and appropriate calibration of green 
bond issuances to these expenditures.  

11 Additional information on the NGEU green bonds can be found in the NGEU Green Bond Dashboard here: Dashboard (europa.eu) 

13 

 
 
 
 
 
                                                 
b)  Achieving a proper 
balance of auctions 
and syndications 
Use of different 
funding techniques 
with a proper 
balance, depending 
on total issuance 
volumes and market 
conditions, in order 
to manage execution 
risks, improve 
secondary market 
liquidity and 
improve borrowing 
costs. 

c)  Establishment of 
large and liquid 
benchmark bonds 
Tapping of EU-
Bonds to bring the 
outstanding volume 
of different lines to 
levels commensurate 
with large and liquid 
benchmark lines. 

iv. 

Split auction / 
syndication in 
%  

Approximately 40 % 
of bond issuances via 
auction.  

In H1 2023, the Commission increased the share of bonds issued 
via auctions to close to 40%, a higher level than in the previous 
funding semesters. This was in line with the objective of expanding 
the use of this technique, while taking account of market 
specificities (e.g. market absorption capacity) and issuance needs 
(e.g. ability to tap existing bonds via auction vs need for issuance of 
new lines via syndications). 

i. 

ii. 

iii. 

Issuances via 
new bonds vs 
volume issued 
via taps 

  EUR 18 billion 
via new bonds  
  EUR 60.2 billion 

via taps 

Speed of 
tapping of new 
bonds12 

Average size 
of outstanding 
bonds13 

2 months 

13-14 billion 

With the liquidity of its securities in mind, the Commission used its 
transactions for tapping existing funding lines, with 70% of the 
funding volume mobilised via taps. 

New funding lines were launched to provide the market with new 
benchmark lines where needed on the curve and based on the 
recommendations of the EU primary dealers. New 3-year, 10-year 
and 15-year bonds were launched during the semester.  

As a result, the average amount outstanding per bond increased by 
around EUR 4 billion to over EUR 13 billion by the end of the 
semester, which helped to improve the liquidity of the bonds. 

iv. 

Turnover 

Approximately 80% 

12 Based on average number of months between new issuance and first tap when considering the new lines tapped over the semester 

13 Outstanding bonds over number of bonds as at end of semester. Based on bonds issued under the diversified funding strategy 

14 

 
 
 
 
 
 
                                                 
 
over H2 2022 

EUR 241 billion in 
H2 2022 vs EUR 236 
billion in H1 2022 

13-14 years  

Around 12 years. 

In H1 2023, the bond issuances had an average maturity of 13-14 
years. This reflected the Commission’s objective of spreading the 
redemptions profile over time while, at the same time, attracting 
investors to EU primary market transactions. The average maturity 
remained below the maximum average maturity of 17 years set out 
in the annual borrowing decision for 2023. 

Less than 10 % 

The average time to maturity of outstanding debt remained stable 
(at around 12 years) – driven largely by past issuances. 

Refinancing also remained stable, a reflection of the past issuances 
and related the redemption profile.  

Less than 30 %. 

v. 

i. 

ii. 

iii. 

iv. 

relative to 
issuance 
volume 
Absolute 
turnover 

Average 
maturity of 
issuance  
Average time 
to maturity of 
outstanding 
debt 
Refinancing in 
the short term, 
i.e. percentage 
of outstanding 
stock of bonds 
and bills 
maturing in 
the next 12 
months 
Refinancing in 
the medium 
term, i.e. 
percentage of 
outstanding 
stock of bonds 
and bills 
maturing in 
the next 5 
years 

d)  Management of the 
maturity profile of 
EU-Bond issuances 
with due regard to: 
  The temporary 
additional 
headroom (for 
NGEU-related 
borrowing) and 
permanent 
headroom (for 
MFA+) under the 
EU budget 

  Future 

redemption of 
disbursements in 
any given year  
  Stable future roll-
over needs 
  The need to 

protect the EU’s 
rating to ensure 
low borrowing 
costs in the long 
run and strong 
demand from core 
investor base. 

2)  Implementation  Regular issuance of EU-

i.  Outstanding 

EUR 15-20 billon 

The Commission maintained issuances under the EU-Bills 

15 

 
 
 
 
of the EU-Bill- 
programme 

Bills with maturities of 
up to 1 year via auction 
to attract additional 
investors (or additional 
portfolios of existing 
investors) and support 
liquidity management. 

volume EU-
Bills 

ii. 

Number of 
EU-Bill 
auctions 

12 

programme at the minimum level in light of low liquidity needs and 
sufficient long-term funding. Two auctions a month were held, just 
to cover redemptions. Outstanding debt under the EU-Bill 
programme thus remained stable at around EUR 15-20 billion over 
the period.  

3)  Liquidity 

Management 

4)  Primary Dealer 

Network 

i. 

i. 

Management of a 
liquidity pool in view of 
payment obligations, 
disbursement needs and 
costs of cash holding, 
with due regard to 
prevailing account 
market conditions. 

Attracting a wide range 
of financial institutions 
showing strong 
commitment to support 
the EU issuances  

None 

Number of 
payment 
failures due to 
lack of 
liquidity 

19 

Number of 
institutions 
which signed 
underwriting 
commitments 
for 
transactions 
over the past 6 
months 

The Commission successfully met disbursement needs and there 
were no settlement failures during the semester. 

The Commission continued to be supported by EU primary dealers 
and rotation was at the syndications helped the Commission to 
make best use of all banks eligible to be part of a syndicate. 

5)  Communication 
with diverse 

Maintaining and building 
trust with investor base, 

i.  Deviations 

None 

from the pre-

The Commission maintained regular and predictable 
communication with the markets, in line with previous 

16 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
announcements. There was no deviation from the initial funding 
target announced during the semester.  

The Commission regularly published investor statistics which 
remained stable and continued to see an increase in its diversified 
investor base. 

market 
stakeholders and 
peer issuers  

market participants and 
peer issuers to support 
demand for EU debt and 
improve the EU’s 
understanding of market 
dynamics and investor 
needs 

announced 
timings for the 
publication of 
funding plans  

ii.  Deviation 

from the 
volumes 
announced in 
the funding 
plan  
Investor 
distribution 
statistics 

iii. 

Less than EUR 2 
billion or less than 
2%. 

Per type: fund 
managers 31.4%, 
bank treasuries 
30.3%, central 
banks/official 
institutions 16.4%, 
insurance and 
pension funds 14.7%, 
banks 5.2%, hedge 
funds 2.0%  

Per country/region: 
UK 21.0%, Germany 
12.9%, France 
12.9%, Benelux 
9.7%, Nordics 8.7%, 
Italy 8.4%, Asia-
Pacific 5.5%, Iberia 
9.6%, other EU 
7.0%, other Europe 
2.2, Americas 0.4%, 
Middle-East and 
Africa 1.5%  

17