Germany’s federal government issued a €6 billion 30-year green bond for the first time yesterday, as part of its strategy to give investors worldwide access to green benchmark bonds.
The new bond will be eligible in Eurex Repo’s markets, including in the Green Bond GC Basket, as well as eligible for margin collateral at Eurex Clearing.
Eurex Repo managing director Frank Gast says: “We are delighted to be able to assist the German Federal Government in further establishing its green yield curve, and we congratulate the German Finance Agency and the involved banks for this successful transaction.
“Established [in November] last year, our Green Bond GC Basket was designed to meet demand from both buy- and sell-side clients with strong ESG mandates and has really kicked off the discussion regarding ESG in the repo market.”
The Green Bond GC Basket encompasses euro-denominated fixed income securities that are issued in adherence with certain guidelines, including renewable energy, preservation of biodiversity and sustainable waste management.
Germany’s ‘green’ federal securities are part of the federal government's sustainable finance strategy, designed to help the country meet its ambitious national and international climate targets.
German Finance Agency executive board member Tammo Diemer says: “With the new 30-year green federal bond we are now offering the longest-dated green bond of a sovereign issuer in the euro capital market and are already completing the long end of the curve — just a few months after entering the green segment — with a maturity in 2050.
“We are very motivated to continue with this concept and thus further contribute to the development of the sustainable financial market.”
The placement of the green bond with national and international investors was carried out by a syndicate of banks under the lead management of BNP Paribas, BofA Securities, Citi, Commerzbank, DZ BANK and HSBC.
Germany’s new Green Bond follows the International Capital Market Association’s European Repo and Collateral Council (ERCC) consultation paper on how a future repo market can fit into green and sustainable finance. The consultation was launched last month and is open until 28 May.
The paper highlights that one of the largest obstacles in green bond trading has historically been the lack of secondary market liquidity. The ERCC envisions a green repo market where buyers and sellers would only transfer bonds that are classified as green, such as the Green Bond GC Basket launched by Eurex, which acts as a short-term funding vehicle for green assets.
