While the issuer has not been vocal about it, it was clear that Germany’s sovereign debt management office, the Finanzagentur, had a clear target in mind with its green Bund syndication this week.
Only a little over six months ago, the issuer voiced its disappointment at the measly greeniums it could achieve in the bond market. “Something is going wrong here,” one of its officials said.
Issuers, though many don’t like to admit it publicly, think the extra costs they bear in issuing a green bond — stitching together different parts of a huge bureaucracy, say, to find suitable assets to fund and then report on their progress — should be something that investors compensate them for by paying extra for a product that fits into their green portfolios.
As the only issuer that prints green bonds alongside a conventional identical twin, any greenium Germany achieves is obvious. It has been its decline. It fell from 1.25bp in 2022 to 0.5bp last year.
Not this time. On its no-grow €3bn tap this week it achieved a full 1bp of greenium. Admittedly, when it tightened pricing it lost €11bn of orders — more than half of the book — but should it have cared?
Certainly, investors’ reluctance to play was understandable. In the secondary market, the green versions of the bonds were trading 0.25bp cheaper than the conventional ones compared to when the tap was priced.
And the order book numbers caught plenty of attention, leading many bankers to think that the sovereign had pushed it too far.
But Germany does not need an order book to far exceed a deal size to have a successful syndication. Its priority was clear — taxpayer value. Mission undeniably accomplished.