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EU bonds will rival German Bunds as a safe asset

Thursday, June 3, 2021

Significance

This could create an alternative benchmark safe-haven asset to rival German Bunds within the region. As part of its issuance plans, the EU intends to issue at least EUR50bn in green bonds annually, which is likely to make it the world’s largest issuer of these bonds.

Impacts

  • The increased importance of EU bonds over time will help to support the euro's value and could eventually put pressure on the dollar.
  • The EU is leading the world in green bond issuance, but the risk of spurious environmental claims (‘greenwashing’) must be managed.
  • The creation of new EU bonds will help reduce the funding costs of riskier euro-area members such as Italy.

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