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Borrowing costs for eurozone bailout fund fall after Greek deal

The EFSF issues a new round of 6-month bills – with interest rates significantly lower than at the same time last month.

EFSF chief executive Klaus Regling: the EFSF sold €2bn of six-month bills today at a rate lower than last year.
EFSF chief executive Klaus Regling: the EFSF sold €2bn of six-month bills today at a rate lower than last year.
Image: Yves Logghe/AP

THE COST OF BORROWING for the eurozone’s bailout fund has fallen this morning, as the fund issued a new round of 6-month bills with interest rates lower than a similar offering a month ago.

The European Financial Stability Facility this morning issued raised just under €2 billion in bills maturing in six months time, in an auction where demand outstripped supply by 3.1-to-1.

The paper sold at an average yield of 0.1908 per cent – well down from the 0.2664 per cent that it paid for similar bonds only a month ago.

EFSF deputy chief executive Christophe Frankel said the bailout fund would continue to establish “our short term bill programme in order to fulfil our financing commitments and provide investors with regular opportunities across the yield curve”.

The EFSF is set to be replaced by a permanent facility, the European Stability Mechanism, later this year.

Though the cost of short-term borrowing does not reflect the price the EFSF would pay for long-term bonds, the news is a welcome boost for Greece, Ireland and Portugal – each of which are dependant on the EFSF for their bailout funding.

Last month: EU bailout fund overcomes downgrade with successful bond auction >

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Gavan Reilly

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