(Bloomberg) — European Union bonds will continue to play an important role in markets for years, an Intercontinental Exchange Inc executive says, rebuking concerns about the bloc’s long-term status as a major issuer .

Chris Rhodes, president of ICE Futures Europe, said the company was moving forward with launching futures linked to an EU debt index next month. This even as rival Eurex Clearing AG delayed plans to launch a similar product citing uncertainty over new issues.

There is still no political agreement on whether the EU will increase its debt beyond 2026, despite pressure from some officials to do so. The bloc stepped up its joint debt issuance program in 2020 to help finance the region’s recovery from the pandemic, and plans to refinance part of this stock until 2058.

“Part of the thesis here is more cooperation and more solidarity when it comes to European policy,” Rhodes said in an interview with Bloomberg TV. “There is uncertainty around emissions, but what we are quite confident about is that European bonds will continue to play a role beyond 2026.”

EU officials are seeking to improve the liquidity of the bloc’s bonds to reduce borrowing costs, and the creation of a futures market has been touted as a way to boost trading. They also recently launched a repo service and have been lobbying index providers to be included in their larger sovereign debt benchmarks.

Bond investors often use futures contracts to hedge their portfolios and all major European sovereign debt issuers, including Germany, France and Italy, have such markets. However, there is no guarantee that a recently launched European futures contract will attract sufficient volumes.

“The market needs to evolve, it needs tools to hedge, that tool doesn’t exist today,” Rhodes said. “As confidence increases, demand will increase and part of growing confidence is asking ‘can you hedge this risk?’ It’s about closing that gap.

ICE’s product will be different from traditional bond futures, which typically require investors to deliver an actual bond at the end of the contract, leading to a rush for the so-called cheapest bonds to deliver. Instead, the company’s future will be tied to an index, similar to major stock futures.

“Particularly with an index methodology that can adapt as emissions change, we think we can have a derivatives market that helps investors hedge,” he said.

–With help from Anna Edwards and Guy Johnson.

(Updated with interview details beginning in paragraph six.)

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