A delay in the European Financial Stability Facility’s offering of a €3 billion max 10-year long bonds this morning sent markets tumbling.
And for good reason — the bond sale delay shows just how volatile markets have become and demonstrate the increasing difficulties EU leaders will have in counting on the markets to bail out Europe.
But first, a little background on what this all means (with statistics from Reuters):
– The EFSF proposed a return to issuing bonds on the open market Monday after a four-month absence.
– It was forced to return to the markets in order to raise money for the next round of Irish aid promised under the terms of the country’s bailout. [It means to give Ireland up to €3 billion ($4.1 billion) by a mid-November deadline.]
– But yields on EFSF bonds have widened considerably since it began issuing them, from 75bps to 90bps.
Essentially, it appears that the EFSF was worried bond yields and demand would show a poor offering, particularly given the dismal attitude over the Greek referendum yesterday. It instead decided to delay the sale to sometime over the next two weeks to get a more favourable deal, assuring investors that it was in no rush to go through with the sale today.
The delay demonstrates the difficulties EU leaders are going to face implementing any sort of bailout based on market conditions. It looks as though raising money will become increasingly difficult, not only for struggling sovereigns but for funds like the EFSF.