The European Stability Mechanism (ESM) has added Euro Commercial Paper (ECP) to its range of financing options.

„ECP offers more flexibility at the short end – it allows us to cover different types of liquidity needs, such as for collateral”, Kalin Anev Janse, Chief Financial Officer of the ESM and the European Financial Stability Facility (EFSF), said in an interview with Börsen-Zeitung.

While money market instruments such as bills are issued according to an auction schedule, the issuance of ECP can take place daily, thus providing the ESM with more flexibility on the refinancing side. Anev Janse specifically highlights the customisation options: “Commercial paper can be tailored to investor requirements in terms of volume and maturity.," he explains.

The programme can go up to 20 billion euros. „Currently, we are in a pilot phase where we want to establish ourselves as a new issuer in the market“, he says. The legal documentation allows for a variety of currencies for the ECP programme, but Anev Janse wants to focus on the euro initially.

The ESM already has experience as a buyer in the ECP market. „As an investor, the ESM has been very active in the commercial paper market for many years”, he says. Various investor groups subsequently approached the ESM, from newly established money market funds to central banks. „For investors facing an inverted yield curve, ECPs are attractive“, he notes, proving a higher yield compared to what can be attained by depositing cash with central banks. “It is important that we can offer our investors a full range of products, and the ECP programme will now provide investors with more opportunities at the short end, while the bill programme remains active in the standard maturities of three and six months, with a target volume of up to 1.1 billion euros.“

For 2024, the ESM and EFSF together have a financing program of 26 billion euros. Of this, 20 billion euros are allocated to the EFSF, and 6 billion euros to the ESM. So far, 15 billion euros has been raised for the EFSF, and 2 billion euros for the ESM, thus completing more than 65% of the total financing for this year.

It is noteworthy that there has been significant participation from Asian investors, as well as central banks and sovereign wealth funds. “This shows that confidence in Europe is strong worldwide“, says Anev Janse.