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EU bailout fund places 6-month bonds at lower rates

The euro zone's temporary financial rescue fund, the EFSF, raised €1.478 billion in a new issue of six-month bonds, which drew substantial demand, the Bundesbank said.

The German central bank said the European Financial Stability Facility received total bids for €3.626 billion worth of bonds, 2.5 times the amount issued.

It said it would pay an average of 0.2033% in interest.

A month ago, the EFSF paid an average interest rate, or yield, of 0.2537% for a previous issue of six-month bonds.

The facility is able to borrow money on sovereign debt markets at cheap rates owing to backing from European countries like Germany, and can pass on the funds on to countries which find it harder to obtain favourable rates.

Three countries are currently in that situation; Greece, Ireland and Portugal.

In a separate development, Germany is to issue two-year bonds at zero interest rate for the first time.