(Bloomberg) -- Demand for a new European Union bond fell short of recent deals as France’s political turmoil roils investor appetite for the region’s assets. 

The bloc gathered €37.5 billion ($40.2 billion) in orders for its 15-year syndicated debt offering on Tuesday, the weakest demand since a three-year issuance in October and way below the €63.5 billion orderbook for a same-maturity sale just over a year ago.

The €6 billion sale comes amid a sharp selloff in European government bonds this week, following French President Emmanuel Macron’s decision on Sunday to call a snap election to challenge Marine Le Pen’s path to power. Market losses deepened on Tuesday with rumors that Macron was preparing to resign, which were swiftly denied.

“It was not the easiest of market conditions to put it mildly, with everything happening in France,” said Jan von Gerich, chief analyst at Nordea. “And that is clearly having notable spill-over effects all over markets, with the EU having its fair share of that.”

It’s also the first time the EU taps bond markets since MSCI Inc. concluded a consultation on whether to reclassify the supranational to sovereign indexes, a move that investors expect to broaden the debt’s appeal if other benchmark providers follow suit. A decision was expected last month but has been delayed.  

EU officials have expressed frustration that its cost of funding isn’t as low as some euro-area member states, often attributing that to the bloc’s classification as a supranational — benchmarks that follow the group are tracked by a smaller cohort of investors than government indexes. 

Inclusion in sovereign indexes is seen as the “the single-most important remaining step in order for EU-Bonds to trade and price similarly to European government bonds,” according to an EU survey of investors last year. The bloc has grown into one of the largest issuers in the region since it started ramping up sales in 2020.

--With assistance from Sujata Rao and James Hirai.

(Updates with pricing throughout.)

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