Germany pinpoints September for green syndicated debut

4 min read
Helene Durand

Once a reluctant user of the syndication method, the Federal Republic of Germany has said it will use it for the third time in 2020, this time to issue a debut green bond. This represents a change of tack for the issuer, given that it had initially said it would sell the paper via auction.

In a statement released on Monday, the sovereign said it was planning to issue a twin green bond in September through a syndicate. The bond will have an identical maturity and coupon to Germany's plain vanilla 0% August 15 2030.

The adoption of the syndication method for the offering marks a change of approach for the sovereign.

It had previously said that "on the primary market, a new green federal security will be sold through the federal government's well-established tender process at a date and at a volume initially designated for increasing the conventional twin".

It will be the third time this year that Germany has strayed from its previous use of the auction process in its domestic market.

"This year, the immense increase in financing requirements has prompted the federal government to introduce new maturity segments and to use syndicates in addition to auctions to issue its bonds," a spokeswoman said.

"In the third quarter, the initial issue of a green German government security was suitable for a syndicate, as the federal government would like to enter a new market segment."

She added that the involvement of a bank syndicate could be particularly helpful in pricing longer maturities.

Germany sold €7.5bn of a new 15-year in early May and a €6bn tap of an August 2050 in June.

"In addition, by approaching investors directly via a syndicate, a larger volume can be placed at a specific time," she said.


Germany has lagged behind some of its eurozone peers in placing green bonds. The likes of France, Ireland and Belgium have started to establish themselves in the format in recent years, with all three using syndication for their inaugural green transactions.

Germany might beat Spain to the post, however. While the kingdom said in early June that bringing its inaugural green bond was still a priority, its emergence would depend on whether Spain could pass a budget this year or not.

While the newcomer has changed tack on how it will distribute the debut green bond, it is keeping to the twin concept it mooted last year.

Under the concept, Germany's new green securities will always be issued alongside an existing conventional federal security with the same characteristics – creating twin bonds, identical in maturity and coupon.

Their volumes will differ, however, with conventional issues being placed at significantly larger volumes than their green twins. They will also differ in their ISIN codes.

"The concept of twin bonds provides investors with a deep insight into market structures, as regards both the price difference between conventional and green bonds, and market participants' demand preferences for various green bond maturities," the Finanzagentur has previously said.

Germany said on Monday it was planning to raise between €8bn and €12bn in 2020 and was planning to sell a five-year after the 10-year.

As well as the green syndication, Germany has not ruled out using the method again for conventional issues.

Issuance plans for the fourth quarter will be released at the end of September, and will include details regarding possible further syndications.

UniCredit analysts now expect gross issuance of Bubills to be €232bn (net supply: €149bn) and gross issuance of Bunds to be €255bn (net supply: €90bn).