Transcript: Interview with ESM Head of Funding Jun Dumolard on 30 October

13 November 2025

By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 30 October 2025 with Jun Dumolard, Head of Funding and Investor Relations at the European Stability Mechanism.

Q: Earlier this month you reopened your 2035 bond and raised €1 billion. It was the most oversubscribed transaction in ESM’s history. What do you think drove such strong demand?

A: There are a few components in this. The ESM is becoming more of a premium product, with a good rating supported by a very strong balance sheet, but also with a diminishing reliance on its liabilities, because all the member states that received help from ESM and EFSF are doing very well today and funding needs are diminishing as time goes by. There's a scarcity effect in our bonds, backed by a very long trading period. Investors can buy a AAA bond with some pickup but also the   understanding that this will be a somewhat rare premium product. So, this is what drove investor demand. Also, the fact that the transaction was fairly small. Out of the €7 billion we had to issue this year, we had €1 billion left to do. That’s also why demand was so strong.

Q: If I am right, that deal marked the end of your 2025 issuance.

A: It was the end of the ESM programme, but as you know, we have two entities that we jointly manage. There’s the ESM funding plan, but also the European Financial Stability Facility (EFSF), which is a bit larger. There are roughly €100 billion in outstanding bonds for the ESM and a bit less than €200 billion for the EFSF. This year’s programme totalled €28.5 billion across both issuers, with €21.5 billion allocated to the EFSF and €7 billion to the ESM. We have also concluded the issuance for the EFSF, raising €4.5 billion in a dual-tranche bond transaction.

Q:  Are your funding plans very calendar-based or more flexible?

A:  We don’t have a fixed calendar like we do for short-term bills, which we issue every two weeks. So, we are opportunistic. This is different from a sovereign issuer, or even the EU, which has a more structural calendar.

Q: Do you still expect the strong interest from investors seen in this year’s deals to extend into next year?

A: It is a structural trend. Unless we have a big change namely new programmes, big financial events, market instability or anything that could disrupt the current situation, the trend will continue. The 2026 issuance plan for the ESM and EFSF is expected to be around €25 billion, down from €28.5 billion. The ESM issuance is expected to stay the same at €7 billion, but the EFSF is expected to decrease to €18 billion. The plan should remain close to €25 billion for [each of] the next 3 years. But there are risks to the downside, which I mentioned, and risks to the upside. If a country is doing well fiscally, they may want to make early repayments. This could further diminish issuance volumes. When things get rarer and scarcer, demand stays strong or even increases. So, I continue to expect strong demand for our bonds.

Q: What should the market expect about your issuance strategy next year?

A: We like to be regular and predictable. As of today, there is no reason to significantly change what we have been doing. So, regarding the pattern of issuing new 3-, 5-, and 10-year bonds every year, I won't say it's rigid, we don't have to exactly stick to this, but it is quite likely that we will remain active along those lines, also because we want to be present on the market and favour liquidity as much as possible. So, 3- to 10-year maturities will remain the comfort zone for our new issuances both for the ESM and EFSF. Of course, if things change, we may adapt a bit. Some investors are requesting longer-dated bonds; that's quite rare in Europe. This is something we hear, and we pay attention to this feedback.

Q: And if you were to issue longer-dated bonds, how far out on the curve would you go?

A: In the past, the EFSF has issued very long-dated bonds, up to 30 years. At the moment, it would be more likely 15- to 20-year maturities. That's the most reasonable alternative, without significantly changing the status of the balance sheet dynamics that we want to manage. If we do issue a somewhat longer-dated bond in the funding mix of the estimated €25 billion next year, that wouldn’t really change the average maturity of the overall issuance. We could issue more short-term bonds so the average maturity remains fairly close to what we have today. But again, unless we have significant adverse conditions or a significant reason to do it, at the moment that's still unlikely.

Q: What issuance timings would you consider for 3-, 5-, and 10-year bonds that are usually part of your pattern?

A: Many things can drive the decision. I can't tell you what we're going to do. We will decide based on our experts’ assessment, on our investors, and also on what’s best for our balance sheet.

Q: You have typically raised around €2 billion in new bonds with these 3-, 5- and 10-year maturities. Do you think that could change in 2026?

A: We raised €1 billion in our last transaction because we only issued €2 billion on the USD deal. The USD transaction can sometimes raise €2 or €3 billion. If we must issue €7 billion in a year, we can do transactions of €3 or €2 billion. If we have more difficult market conditions, we can limit them to €1 billion. But it’s true that, for liquidity reasons, we’re less keen on new bonds with only €1 billion outstanding. Given our size and outstanding debt, a minimum of €2 billion for a new benchmark is a good spot to be in. That can also further increase with taps when we reopen those bonds, like our last ESM transaction. So, €2 billion is reasonable. Also, we tend to concentrate our issuance in the first half of the year, to get ahead whenever market conditions are favourable.

Q: Some investors argue that ESM bonds are less liquid than EU bonds. Is improving liquidity something you actively target through syndication strategy?

A: Yes. We are less liquid than the EU, but we are much more liquid than most other SSA issuers. So, any issuance, even the smaller ones, is done trying to maximize liquidity. If investors require us to pay a liquidity premium, in some cases we can consider it. But, given that we are within the safe-assets class, we are more liquid than many other smaller agencies.

Q: Would you consider tools like buybacks, switches, or larger benchmarks in order to improve secondary market liquidity?

A: We always consider anything that is standardized market practice. So, these are very usual tools. Nothing in the short-term suggests we should seek to use them, but it's always a possibility. We can use them if we want to, if programs decrease significantly, if the best-performing countries want to redeem their loans early. If we were to do it, it would always be because it is the best for the balance sheet and member states find it useful.

Q: You reopened one bond a few weeks ago. What criteria will you use next year to decide which bonds to reopen, and at what timing?

A: Usually this is fairly predictable. We have to build a curve, and as time goes by bonds reach maturity. So, it is important that we issue new ones so we can still have a regular curve with different benchmarks. Generally, the usual pattern, though it can always change, is to launch a new benchmark at the start of the fiscal year to kick off the funding plan. As we progress through the year, we then look at adding liquidity to existing bonds.

Q: Are you seeing demand concentrate at specific maturities, or is appetite spread fairly evenly across the curve?

A: After a very exceptional decade, we are going back to a more natural situation. Curves now, not just in Europe, make sense. They are steep, and for us this is favourable in the sense that we are not very active on the long end, with a very high yield environment. This is good for our cost of funding. We do find very natural behaviour from investors. Monetary funds and investors are focused on the very short term, on the bills program; bank treasuries are across the maturities, but not extending as far as they used to, just like central banks, as some of them used to buy +10-years. This has stopped. Having a close relationship with investors is now more important.

Q: Your USD deal this year saw record demand. Should we expect another dollar issuance in 2026?

A:  It’s important to explain why we have a USD programme.  We need to remain flexible, to be able to use any pool of liquidity on bond markets whenever there's a crisis. We have seen in the past that some crises only hit regionally, and thus it is good to have diversified capacity on currencies. In the summer USD transaction, we saw very strong demand from investors because many of them can't buy euro denominated bonds. They may have an interest, we hear it in discussions, but they still don’t have the authorization or the operational capability to do it. If they buy ESM bonds in USD and some day they want to have a euro portfolio, it will be very easy for them to buy the ESM euro bond issuance. Also, in 2025 we observed very strong interest for safe asset investments in USD, but outside US treasuries. Whether this will continue next year will depend on the cost relative to the euro equivalent transaction. But we want to stay active on USD because it's also about ensuring the relationship with those investors who are further away.

Q: Are you open to issuing in other foreign currencies or is that off the table now?

A: Again, no closed decision. But it would be difficult because you need it to be very liquid and to have strong demand. If it has a very strong cost, it will be difficult for stakeholders to accept it. But we have a shifting geopolitical situation. So, if we do end up having stronger partnerships and relationships with other areas, perhaps Asia, Australia, others in North America, it might be a good way to diversify our tools. But today generally we don't have a strong need to do it.

Q: Other EU issuers such as the European Commission and EIB have had success with green and social bonds. Is the ESM considering a similar path, or does your mandate make that difficult?

A: For the ESM, our ESG focus is through our investment programme. By the end of 2024, the ESM had invested €7.4 billion of its paid-in capital in use-of-proceeds bonds, split as 40.9% in green bonds, 23.8% in social bonds, and 34.0% in sustainability bonds.

Q: How satisfied are you with your current investor base? Are there segments (central banks, asset managers, ESG funds…) where you would like to see greater participation?

A: The goal is always to keep good relationship with the ones that bought our bonds in the past. And we are happy with our investor base.  That being said, there are two new categories of investors: first the ones who have never bought euro-denominated bonds, and  those that used to buy euro-denominated bonds before the low-rate environment. We see this notably in Asia, where central banks have returned to this market, but some others are still on the sidelines. Some European investors, for example, may now be more interested in buying ESM and EFSF bonds as they can get a AAA bond almost in the same conditions as their national bonds.