Spain launched its first ever green bond on
Tuesday, leading a flurry of such issuances expected in September.
The 20-year bond sale will raise 5 billion euros, according
to a lead manager, in line with expectations laid out by the Spanish Treasury
in an investor meeting in July.
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The deal received 60 billion euros of demand and will price
to offer a spread of 6 basis points over an outstanding Spanish bond due in
October 2040, the lead manager said, down from around 9 basis points when the
sale started.
"Clearly a book of 60 billion is impressive for a 5
billion, 20-year deal. It illustrates the demand for green bonds," said
Piet Christiansen, chief strategist at Danske Bank.
Spain joins a growing club of European states which have
issued green debt this year to finance environmentally beneficial expenditure,
as demand for such assets continues to boom.
More supply is expected with the European Union announcing
on Tuesday that it planned to issue its first green bond backing its recovery
fund in October via syndication, and that its auctions to back its bills
programme will start on September 15.
Germany will sell its fourth green bond in an auction on
Wednesday, while Britain will come to market in the week of September 20.
The deal offered investors a one basis point new issue
premium, according to UniCredit analysts.
The pricing was watched closely as green bonds tend to offer
a slightly lower yield and lower new issue premiums than conventional peers,
given specialist investors chasing a limited supply.
In the broader market, Germany's 10-year yield rose to the
highest since mid-July at -0.313 percent, up 5 basis points by 2:19pm, in line
with a global bond sell-off that also saw US Treasury and British gilt yields
jump.
Southern European bonds underperformed, with Italy's 10-year
yield rising 7 basis points to the highest since early July at 0.768 percent,
while Greek 10-year yields jumped to a three-month high at 0.877 percent.
"We see some technical levels being broken, there are
probably also some supply concerns going on," Christian Lenk, strategist
at DZ Bank, said of the rise in yields on Tuesday.
In addition to Spain's deal, Austria raised 1.4 billion
euros from the re-opening of bonds due 2031 and 2037, while Germany raised 556
million euros from the reopening of inflation-linked bonds due 2030 and 2046.
Investors also watched data releases on Tuesday. Eurozone
economic growth for the second quarter was revised upwards to 2.2 percent,
above expectations.
The ZEW economic sentiment survey showed that investor
morale in Germany deteriorated more than a Reuters poll expected.
Data showed the European Central Bank accelerated the pace
of its bond purchases last week. Investors are focusing on the pace it will set
for its pandemic emergency bond purchases during the fourth quarter at its
policy meeting on Thursday.
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