EIB sterling bond outstandings reach GBP 50 billion - largest in non-gilt market - in EIB’s 50th anniversary year

•  Latest sterling issue brings EIB GBP bond outstandings to over GBP 50bn
• Largest share in non-gilt index: 10%
• Over 30 years’ presence in GBP market

Today EIB’s sterling bond outstandings reached the GBP 50 billion mark, a record for the EIB and the non-gilt market. This follows today’s GBP 100 million tap of the 4.25% 7 December 2010 issue. The Bank has for some time been the leading issuer in the non-gilt market, as measured by its share of the Barclays non-gilt index. This comes in EIB’s 50th anniversary year – the Bank was established in 1958 under the Treaty of Rome that created the European Communities.

This new peak in the Bank’s sterling outstandings comes following a long period of particularly strong demand for EIB sterling bonds, as issuance remained active virtually throughout recent market turbulence.   

Amidst this turbulence, investors have especially welcomed the liquidity, quality and value offered by EIB sterling bonds across a very broad range of maturities. The EIB sterling curve extends out to 2054, with 19 bonds sized at GBP 1 billion plus and among these 6 have outstandings of over GBP 3 billion.

As a further highlight, today’s tap brings the outstanding amount of the December 2010 issue to GBP 4 billion, making it the largest outstanding non-gilt sterling bond.

A very brief history of EIB in the sterling market

The Bank has been an active participant in the sterling market since 1977. It established a position as the leading sterling issuer alongside the UK government, and holds the largest share of the Barclays sterling non-gilt index (currently the EIB has a weighting of 9.6% in the index). Its provision of a comprehensive and liquid yield curve, reaching out to 2054, is indicative of the Bank’s status and strategic approach.

Driven initially by demand for sterling denominated loans, sterling’s importance was ultimately also anchored in the depth of the market and a strong reception for EIB’s innovative role in the non-gilt market.

EIB’s GBP (and EUR) bonds became eligible as collateral at the Bank of England in 1999, and gained added importance for UK banks when the FSA made EIB GBP bonds eligible for sterling stock liquidity. This function was highlighted in 2000 when the ‘Minimum Funding Requirement’ (MFR) drove exceptional demand for triple-A securities. In that year, GBP was the Bank’s largest issuance currency, with a volume of GBP 8.7 billion, exceeding that of the gilt.

In 2000 the Bank set up a GBP dealer group, designed to develop a pricing policy aimed at providing a high degree of transparency and consistency. In the same year it started to issue in inflation-linked format, initially to hedge inflation linked lending in sterling. Although the majority of EIB sterling bonds are sold to institutional investors, in 2001 it also established a retail dealer group and launched a retail programme.

BACKGROUND INFORMATION

The European Investment Bank, based in Luxembourg, was set up in 1958 under the Treaty of Rome. Owned by the European Union Member States, the EIB is the EU’s long-term lending institution, financing projects that promote European economic development and integration. Besides supporting projects in the Member States, its main lending priorities include financing investments in future Member States of the EU and EU Partner countries. The EIB operates on a non-profit maximising basis and lends at close to the cost of borrowing. The Bank’s consistent AAA rating is underpinned by firm shareholder support, a strong capital base, exceptional asset quality, conservative risk management and a sound funding strategy. In 2007, EIB raised EUR 55 billion. Under its 2008 funding programme of EUR 55 billion the Bank has already raised over EUR 40 billion including today’s transaction.