Germany Successfully Issues 10-Year Green Federal Bonds with 2.50% Coupon
Germany Successfully Issues 10-Year Green Federal Bonds with 2.50% Coupon
On April 8, 2025, the Federal Republic of Germany conducted a successful auction of its new 10-year Green Federal Bonds, achieving a total issuance volume of €3 billion. These bonds, maturing on February 15, 2035, carry a 2.50% annual coupon and were met with strong investor demand, reflecting confidence in Germany’s commitment to sustainable financing.
Auction Results Overview:
Total Bids Received: The auction attracted bids totaling €3.157 billion, comprising €1 billion in competitive bids and €2.157 billion in non-competitive bids.
Allotment Details: The German government allotted €2.38572 billion of the bonds, with €614.28 million retained for its own account.
Pricing and Yield: The lowest accepted price was set at 98.96%, with a weighted average price of 98.98%, resulting in an average yield of 2.62%.
Bid-to-Cover Ratio: The cover ratio stood at 1.3, indicating a healthy level of investor interest relative to the amount offered.
Green Bond Commitment:
In alignment with its Green Bond Framework established on August 24, 2020, Germany has committed to allocating an amount equivalent to the proceeds from this issuance towards expenditures that meet specific environmental criteria. This initiative underscores Germany’s dedication to financing projects that contribute to environmental sustainability and the transition to a low-carbon economy.
Increase in Conventional Twin Bond:
Simultaneously, the German government announced an increase of €1 billion in the outstanding volume of its conventional 2.50% Federal Bond maturing on February 15, 2035 (ISIN DE000BU2Z049). This adjustment raises the total outstanding volume of this bond to €24 billion, with the additional amount added to the government’s own holdings.
Market Implications:
The successful issuance of the Green Federal Bonds at a 2.62% yield reflects favorable market conditions and robust investor confidence in Germany’s fiscal health and environmental initiatives. The bid-to-cover ratio of 1.3 indicates solid demand, suggesting that investors are increasingly prioritizing sustainable investment opportunities.
Conclusion:
Germany’s latest auction of 10-year Green Federal Bonds demonstrates the country’s effective approach to integrating environmental considerations into its financing strategies. The strong investor response highlights the growing appetite for green securities and reinforces Germany’s position as a leader in sustainable finance. As the global focus on environmental sustainability intensifies, Germany’s commitment to green bonds sets a benchmark for other nations aiming to align their financial practices with environmental objectives.
