The paper analyses the market for euro-denominated bonds issued by the European Commission on behalf of the European Union, i.e. Eurobonds. The aim is to assess, in particular, the factors that determine the yields of bonds currently in circulation, in order to identify possible solutions to reduce the overall cost of debt and make joint issuance programs advantageous for all member states.
The lack of liquidity and the uncertainty over the issuance outlook translate into a higher financing cost - 40 basis points higher than in a scenario where Eurobonds, jointly guaranteed by Member States, have similar characteristics to national government bonds. Continuous issuance, supported by mechanisms to redistribute savings on interest expenditure, would foster the development of the Eurobond market and help reduce financing costs for all member countries.
