The EU bond market has rapidly grown into a major asset class, with outstanding bonds totaling around €660 billion and expected to reach €1.1 trillion. Although not true Eurobonds, demand remains strong. Future joint defense initiatives could lead to large-scale EU bond issuance for military and security spending.

These bonds are backed by the EU budget and are not a permanent fiscal union. The idea of true common Eurobonds is controversial, with concerns about shared liability and fiscal irresponsibility. Proposals have been made to replace existing national bonds with Eurobonds to create a pool of European high-quality assets.

Index providers treat EU bonds as supranational, not sovereign bonds, with a AAA rating. The EU aims to have its bonds included in government bond indexes for benchmark status. A strong EU bond market is crucial for cheaper borrowing and greater strategic autonomy, reducing reliance on US-dollar assets.

The EU bond market could swell to €1 trillion as programs like the Recovery and Resilience Facility are utilized. Retail investors can buy EU bonds through banks or brokers, with improved liquidity and the option to invest in mutual funds or ETFs. Recent innovations like Euro-EU Bond Futures deepen the market and provide tools for risk management.

Read more at Morningstar: What Are EU Bonds and Can They Become a Safe-Haven Powerhouse?