Exclusive: European DMOs Unaffected by Market Turmoil So Far, Attentive to Secondary Market Volatility

29 April 2025

By Marta Vilar – MADRID (Econostream) – Sovereign issuers in Europe have not registered any major impact from the bond market turmoil following the April 2 US tariff announcement, but are attentive to secondary market developments, according to sources from four important European sovereign debt issuers.

‘So far we have not seen any major impact on our EUR funding’, said one of the sources, who said that an auction delivered in the weeks after the US tariff announcement ‘went very well’ despite a high issuance volume.

Another source said that an auction that also took place after the tariff announcement was held under ‘normal’ conditions, with the amount raised in the upper part of the targeted range.

Investor interest in this sovereign’s debt issuance before and through all post-announcement turmoil to date was regarded as ‘high’ by this source.

One other European DMO indicated that the US bond market turbulence did ‘not really’ have an impact on their bond issuance, ‘judging by secondary market developments.’

‘Peer group primary market issuance also speaks for a muted effect for European sovereigns’, the source added.

A different sovereign debt issuer said it had observed ‘strong demand’ in an auction after the April 2 announcement, ‘with rates being pushed down given a flight to safety from investors.’

This DMO stated it remained committed to its initial issuance plans for 2025 and only a ‘strong’ deviation from current estimates would trigger a more flexible issuance.

Despite ongoing volatility in bond prices, all four sources consulted by Econostream seemed confident, with two of them citing volatility in secondary markets as a potential issue.

‘In terms of potential new syndicated issuance, the high volatility on the secondary market is challenging’, said one of them.

Another DMO said that higher volatility had slightly deteriorated liquidity, but transactions were being delivered under normal conditions.

Broader implications for Europe of this US bond market selloff were difficult to predict, according to one source, but could potentially be felt in the long term.

Investors could now see European debt as a more stable safe-haven asset than US bonds, a different DMO said.

‘This more favourable perception of the euro could attract new investors who currently lack exposure to the European currency’, this source said. ‘To achieve this, it will be essential to continue making progress on the European Capital Market Union’.

Asked about the effect of a potential sale of US Treasuries by China, this person said such action would be ‘counterproductive’ for China, as it would devalue its international reserves.

‘The current context could reinforce the trend observed in recent years, in which Chinese investors have been diversifying towards other regions, such as Europe’, the source said.