EFSF €Benchmark 7y Sep-2033 — Fair Value Note
EFSF has mandated a new EUR benchmark 7-year line maturing 6 September 2033 (ISIN EU000A2SCAZ3), with Citi, Crédit Agricole CIB and LBBW running the books. We mark fair value at MS+22 bid-side, derived from three independent triangulation methods on EFSF's own curve which converge within 0.7bp. We expect IPT to open in the MS+25/26 area, with guidance tightening to MS+23 area (-3bp) and reoffer landing at MS+22 — clearing at fair value with zero new issue concession. Our size expectation is €4bn, with room to €5bn if the book builds in line with the January 10y print. Reoffer yield approximately 3.16%, coupon 3.125%, price near 99.80 with a short first stub to 6 September 2026. The trade prints as a 10bp pickup over the AAA-supra cluster and 4bp over EU same-tenor.
Our Thesis
The most important point we make on this trade is that the EFSF curve has drifted 3-4bp wider since the January and February reoffers. The 5y line priced at MS+11 in February now bids MS+13.4. The 10y priced at MS+30 in January now bids MS+34.2. Anyone marking the new 7y against stale reoffer anchors will under-price the line by 3-4bp. Our MS+22 fair value is calibrated against the current secondary curve, not the reoffer trajectory.
Three methods support our level. Linear interpolation between the EFSF 2.875% Feb-33 (6.79y, MS+20.4) and the EFSF 2.875% Feb-34 (7.78y, MS+24.4) gives MS+22.6. The same interpolation using the off-the-run 1.25% May-33 as the lower anchor gives MS+22.3. A six-bond regression across the 6-8y bucket, excluding low-coupon distortions, lands at MS+23.0. Average MS+22.6, marked at MS+22 on bid-side.
We then cross-check against the European AAA-supra cluster, which has crystallized into a single point at the 7-year tenor: ESM 3% Aug-33 at MS+12.3, EIB 3% Jul-33 at MS+12.3, KFW 2.875% Jun-33 at MS+12.2. Three issuers, three identical funding levels. The EU 7y prints approximately 5-6bp wider than this core, reflecting its heavier supply burden despite the AAA Moody's anchor. Our MS+22 fair value puts the new EFSF line 10bp wide of the AAA-supra cluster and 4bp wide of EU.
That 10bp basis to ESM is the trade. Historically EFSF has traded 3-5bp wider than ESM at comparable points on the curve. The current 10bp gap reflects three structural factors: post-France S&P/Fitch downgrades to A+ (Moody's still anchors at Aaa), heavier 2026 EFSF supply versus ESM's lighter calendar, and EFSF's run-off structure versus ESM's active lending capacity. None of these are new — the basis simply reflects them being fully in the price.
The govie cross-check confirms the level. At the 7.34y point, our fair value of MS+22 equates to approximately Bund+33 — comfortably inside OAT (Bund+55) and BTP (Bund+61), just outside EU (Bund+29). Exactly where a Aaa-Moody's-anchored E-supra should clear into a tape still digesting French fiscal noise.
We expect the lead trio to run a clean -3bp ratchet from IPT to reoffer, consistent with the playbook on every 2026 EFSF print to date. NIC at landing: zero.
