AMSTERDAM (Reuters) - Germany saw good demand for its first-ever green bond on Wednesday, in a landmark moment for Europe’s climate-focused finance drive.
Germany raised 6.5 billion euros from the 10-year bond, after investors queued up for over 33 billion euros, its finance agency said in a statement.
“With today’s issue of the government’s first green bond, we have taken an important step towards significantly strengthening Germany as a sustainable finance location,” German deputy finance minister Joerg Kukies told Reuters.
Germany hopes to issue a range of bonds with different maturity dates to build a green yield curve that other countries and companies looking to sell their own green bonds could then use as a reference point.
Its programme also features a unique feature where investors will be able to swap the green bonds for an otherwise identical conventional bond, to help mitigate any liquidity concerns.
“It is a welcome move and certainly in terms of growing the size of the green bond market this is a landmark day,” said Eila Kreivi, head of capital markets at the European Investment Bank’s finance division. She pioneered the launch of the world’s first “green” bond in 2007.
Germany’s decision to issue a variety of maturities should help central banks and bank treasuries become more active in the green bond market, said Tanguy Claquin, head of sustainable banking at Credit Agricole’s investment banking arm, which structured Germany’s bond.
The European Central Bank recently opened the door to use its bond buying programme to pursue green objectives.
“Clearly, there was a segment of the market that was missing, which was the benchmark, short to mid-term maturities... an area where there is a large investor category that was not so active in the green bond space, which will now have more possibilities to enter the market,” Claquin said.
Previous euro zone issuers, like France and the Netherlands, have focused on selling one, long-dated green bond of around 20 years and upsizing it over the years.
Every time it sells a green bond in future, Germany will also increase the size of the conventional twin on its own books.
With two otherwise identical bonds, investors are watching how the new green bond fares compared with its conventional twin.
The bonds priced for a yield of -0.463%, meaning investors paid a 1 basis point premium compared with the conventional twin. That confirmed expectations the bond would come at a premium for investors hoping to bolster their green credentials.
Germany hopes to raise up to 11 billion euros from green bonds this year, with a second bond planned. France has issued around 27 billion euros worth of green bonds in the past three years.
In the secondary market, German 10-year bond yields fell to their lowest in over a week at -0.48%, in their biggest daily fall since early June.
Reporting by Yoruk Bahceli, additional reporting by Christian Kraemer in Berlin, Marc Jones in London and Stefano Rebaudo in Milan; editing by Angus MacSwan, Larry King and Giles Elgood
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