Eurex to launch futures on joint EU bonds

Reuters

23-04-2025

LONDON, April 23 (Reuters) - Deutsche Boerse's derivatives arm Eurex said on Wednesday it will launch futures contracts on the European Union's joint bonds, marking a key step in boosting the bloc's profile as a borrower just as it eyes more debt to raise defence spending.
Trading will start on September 10, Eurex said in a statement.
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Futures contracts are derivatives through which investors buy, or sell, underlying securities at a future date. They make trading easier by boosting liquidity and allow investors to hedge their positions.
The world's biggest bond markets, from the United States to Germany, are supported by futures markets, so the launch of an EU contract is seen as an important step as officials push for markets to treat the bloc on the same terms as a government borrower.
The EU, which expects to raise over 700 billion euros ($803 billion) in common debt with the backing of member states by 2026 to finance a COVID recovery fund, has become one of the biggest borrowers in global bond markets in recent years.
Its status as a borrower beyond 2026 remained uncertain until recently, but the bloc has proposed to jointly borrow up to 150 billion euros on the bond markets to finance loans that help member states raise defence spending.
Matthias Graulich, global head of products and markets at Eurex, said the launch was "a strategic commitment to supporting European ambitions for greater autonomy at a time when the continent is relying on additional debt issuance and investors are seeking tailored tools to manage their exposure to EU debt."
With tight budgets expected to constrain many member states' spending efforts, investors and economists say the EU may need to provide even more joint financing to give a bigger boost to defence spending and for it to rise more evenly across the bloc. Doing so would require the EU to issue even more debt.
Eurex said the futures contracts would be based on EU bonds maturing in eight to 12 years and have the same 6% coupon as the exchange's 10-year futures on German, French, Italian and Spanish bonds.
The launch follows New York Stock Exchange parent ICE, which introduced a futures contract on an index of longer-dated EU bonds in December.
But inclusion in government bond indexes, which the EU has said was the most important step remaining for its debt to be seen on a par with those of governments, has proven tougher.
Index providers including Bloomberg, MSCI and ICE have all decided against including the bloc's bonds.
($1 = 0.8719 euros)