Market News
Central banks ramp up buying at euro zone bond sales - REUTERS
Summary
- Official institutions increase buying at euro zone bond sales
- Bloc offers more stability than US, bankers say
- Too early to conclude major shift in FX reserves - bankers
LONDON, July 16 (Reuters) - Central banks have ramped up buying at euro zone bonds sales this year, data shows, in a positive sign for the euro as the bloc looks to benefit from diversification away from U.S. markets.
U.S. President Donald Trump's confrontations with longstanding allies over trade and security, along with attacks on the Federal Reserve, have raised concerns around the safe- haven status of the U.S dollar, the world's No.1 reserve currency, which has tumbled 9% this year .
The euro meanwhile has surged 12% and policymakers are keen to seize the moment to boost its role as a reserve currency. Higher demand from central banks, which manage trillions of dollars in currency reserves, is therefore notable.
Official institutions, which include central banks and sovereign wealth funds, have bought a fifth of euro zone government debt sold at syndications year-to-date, up from 16% for the whole of last year, a Barclays (BARC.L) analysis showed, using debt management office data. Debt sales where official institutions were allocated large shares include 55% of a 30-year German bond sale a day after the country announced a historic shift to looser fiscal policy in March, and 27% of a 10-year Spanish bond sale in May. Advertisement · Scroll to continue.
Syndications, through which governments hire banks to sell bonds directly to investors, allow for results to be closely tracked to monitor shifts in demand. Syndicated sales raised over 200 billion euros ($232.40 billion) last year for euro zone governments, and are a key source of funding.
Allocations to official institutions did not increase in 2024, the data showed, after rising from 8% in 2021, following which euro zone interest rates turned positive after almost a decade of below-0% rates.
ASIA DEMAND
Bankers who run the debt sales said demand from Asian institutions stood out this year and was spread across the board.
"Some Asian clients in particular are coming back into the euro zone government bond space," said Benjamin Moulle, global head of primary credit for sovereigns, supranationals and agencies at Credit Agricole CIB.
