Germany gets RM165b of orders for its debut green bond

NEW YORK • Germany racked up €33 billion (RM165 billion) of orders for its first green bond as it sets out to dominate the growing market by the end of the year.

It looked set to raise €6.5 billion from the 10-year sale, at a price one basis point tighter than the existing conventional bond, according to a person familiar with the sale, who asked not to be identified because they’re not authorised to speak about it. The nation will now make up nearly a 10th of the entire green government bond market, according to Bloomberg calculations.

“It clearly shows there is a lot of investor interest,” said Floortje Merten, a strategist at ABN Amro Bank NV. “This will help Germany to build that green curve soon.”

The demand nearly matched a record set for its conventional bond sales earlier this year. Another green maturity is due to be sold in the fourth quarter, taking issuance this year to around €11 billion, Germany’s Deputy Finance Minister Joerg Kukies said last week.

While the nation has lagged others in issuing debt to be used for environmental projects, its entry is significant for the size of issuance and plans to twin the bonds with conventional securities in an effort to build a more liquid market.

The country aims to be the benchmark issuer for green debt in Europe, according to Kukies, taking up a mantel that it has long held with its normal bonds thanks to its AAA rating. The green debt has a coupon of 0%, with similar-maturity conventional bonds currently yielding around minus 0.45%.

Sweden saw investor demand at more than double the amount offered when it raised US$2.3 billion in its debut green bond sale this week, as a summer lull in issuance ended. Poland was the first to issue such securities in 2016 and France is currently the biggest issuer in the world.

The European Union (EU) looks set to follow for part of its €750 billion recovery fund, which would be a game-changer for the global market. EU leaders and German Chancellor Angela Merkel have said that they want the region’s recovery from the coronavirus crisis to be a green one.

Barclays plc, Credit Agricole SA, Deutsche Bank AG, JPMorgan Chase & Co and UniCredit SpA are also joint lead managers. ABN’s Merten highlighted that the green bonds could be switched for conventional bunds if the price drops below them, helping to provide a floor. — Bloomberg