The European Stability Mechanism (ESM) was established in 2012 and is headquartered in Luxembourg. It serves as the financial backstop for Eurozone countries in economic distress, aimed at safeguarding financial stability within the euro area. The ESM primarily raises funds through the issuance of bonds to provide loans to member states, thereby supporting them during financial crises.
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Since its inception, the ESM has been active in the bond market, issuing its first bonds in 2013. Notable issuances include a €3 billion 10-year bond in 2018 and a €9 billion issuance to fund pandemic-related support in 2020. Currently, ESM bonds are known for their attractive yield relative to other sovereign bonds in the industry, with features like callable options depending on market conditions. The ESM continues to play a crucial role in stabilizing the Eurozone economy and has been recognized for its rapid response to financial crises.