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EU bailout fund overcomes downgrade with successful bond auction

The EFSF sells six-month bills with an average interest rate of 0.2664 per cent – despite being downgraded yesterday.

EFSF chief executive Klaus Regling: the EFSF sold €1.5bn of six-month bills today at a low interest rate.
EFSF chief executive Klaus Regling: the EFSF sold €1.5bn of six-month bills today at a low interest rate.
Image: Ng Han Guan/AP

THE EU’S BAILOUT fund has successfully raised €1.5 billion from the bond markets this morning through an auction of six-month bills – commanding competitive interest rates despite being downgraded just yesterday.

The European Financial Stability Facility sold €1.501 billion of six-month bills with an average yield of 0.2664 per cent, and demand standing at over three times the amount on offer.

In a brief statement the EFSF underlined that the low yield of its bonds was helped by the fact that its bills (short-term bonds) commanded the top credit rating with Standard & Poor’s, Moody’s and Fitch.

Yesterday’s downgrade by Standard & Poor’s reflected only the EFSF’s long-term bonds, which it has taken out in order to fund the bailouts of Ireland and Portugal.

Today’s auction was the second bill issued by the EFSF: it issued a three-month bill last month with a yield of 0.222 per cent.

Spain raises nearly €5bn in successful short-term bond auction

Bailout costs likely to rise after S&P downgrades EU fund

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Gavan Reilly

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