Bonds News

UPDATE 1-EU launches third SURE bond sale; euro zone yields edge up

* EU receives 90 bln euros of initial demand for new SURE bond

* To raise 8.5 bln euros

* Ifo survey, Trump have little impact on market (Recasts, adds details)

AMSTERDAM, Nov 24 (Reuters) - Investors scrambled to buy the European Union’s latest bond to fund its SURE unemployment scheme on Tuesday, while reaction to Donald Trump giving the green-light for a new administration and weak business sentiment readings in the bloc was muted.

Initial orders for the 15-year social bond totalled more than 90 billion euros, or more than 10 times the 8.5 billion euros on offer. The deal will price later on Tuesday.

Christian Lenk, a strategist at DZ Bank in Frankfurt, said the deal was likely to be the last transaction from the European Union this year, with the EU unlikely to pre-fund large amounts, given its back-to-back principle in borrowing and lending, where the funds raised are tied to their disbursement schedule to member states.

The EU initially expected to raise around 30 billion euros for SURE this year but strong investor demand for its issues meant it had already exceeded that prior to Tuesday’s sale, which will bring the total to 39.5 billion euros.

In the broader market, higher-rated yields rose modestly, with Germany’s 10-year yield up 1 basis point to -0.57% after U.S. President Donald Trump’s go-ahead to proceed with a transition to President-Elect Joe Biden’s administration boosted risk assets at the expense of safe-haven bonds.

France’s daily coronavirus tally hitting its lowest since September and expectations that President Emmanuel Macron may later on Tuesday announce an easing of lockdown rules also helped risk sentiment.

Business morale in France dropped to a five-month low in November and fell for a second month in Germany, suggesting the euro zone’s largest economy will shrink in the fourth quarter.

DZ Bank’s Lenz noted that bond markets have been in a “wait and see mode” since recovering from a sell-off on optimism around Pfizer’s vaccine efficacy earlier in November, with little to drive them apart from expected stimulus from the European Central Bank in December.

A number of ECB board members are due to speak later on Tuesday, with President Christine Lagarde scheduled for 1400 GMT.

($1 = 0.8420 euros)

Reporting by Yoruk Bahceli; Editing by Susan Fenton, Kirsten Donovan