Germany begins calls for green 30-year

5 min read
David Cheetham

Germany has taken a step closer to launching its third green bond - and second in syndicated format - having commenced a series of bilateral investor calls, with a global investor call scheduled for May 6.

The calls, arranged by Commerzbank, are to give an update on the borrower's green bond programme with a 0% August 2050 green benchmark expected to come as soon as next week.

“It’s widely expected for next week, maybe Wednesday. There are calls going on so I think it will come sooner rather than later," said a syndicate banker who expected the trade to be in a similar size range as the sovereign's inaugural green deal, a €6.5bn August 2030 note which priced last September.

“I think somewhere between €5bn-€7bn. They can go for a big size.”

Once more, the issuer plans to utilise its twin structure format, choosing a conventional bond with the same maturity and coupon to allow for a like-for-like pricing and demand comparison that will highlight any green premium, or 'greenium'.

The borrower's outstanding 0% August 2050 note, printed in August 2019, will serve as the conventional benchmark, with the paper on Tuesday afternoon bid at 0.354%, the highest yield level since it priced, according to Tradeweb.

For 2021, the sovereign plans to issue a similar amount via green bonds as last year. A second green 10-year will be issued in September via auction, sized at €3bn and then reopened for a further €3bn in October. Its conventional twin will be the August 2031, which is scheduled to be printed on June 16.

Last year Germany raised €11.5bn through the aforementioned inaugural green 10-year and a €5bn October 2025 benchmark that priced in November via an auction.

Germany plans to establish a green yield curve for the euro area, with the common key maturities of the conventional curve: two, five, 10 and 30 years.

Land NRW is also gearing up for an ESG offering, having mandated Bank of America, BNP Paribas, Credit Agricole, DekaBank, ING (sustainability bond reporting advisor) and Rabobank (sole sustainability structuring advisor) to arrange investor calls starting on May 5. A global investor call is scheduled for May 11.

A euro-denominated sustainable benchmark may follow, subject to market conditions.

“They’ll probably go for a dual-tranche because they have quite a large amount to fund, €3.5bn. Five- and 20-years could work," said the banker.

Greece is expected to bring its third syndicated deal of the year on Wednesday, with Barclays, Bank of America, Citigroup, Commerzbank, Morgan Stanley and Societe Generale appointed lead managers for a five-year euro benchmark. The sovereign was upgraded by one notch to BB by S&P last month, thanks to the EU's large fiscal support.

It has already raised €2.5bn with a 30-year in March and €3.5bn with a 10-year at the end of January.

No order book

The State of Saxony brought the largest of two SSA deals on Tuesday but once more struggled to attract much interest, with its €500m no-grow transaction coming with no update on order book size.

The spread for the 0.4% May 2036 note was set at mid-swaps flat, unchanged from guidance via Deutsche Bank, DZ Bank, LBBW and UniCredit. There was no new issue concession on offer, according to the banker.

“I have to say here the price was not wrong. It’s difficult to say what the right price is for a 15-year but I think it should be around flat," he said, referencing issues from State of Berlin and Lower Saxony as comparables.

Berlin's €500m 0.15% February 2036 paper and Lower Saxony's 0.25% April 2035 note were bid at mid-swaps flat and plus 1bp respectively on Tuesday afternoon, according to Tradeweb.

This is the second time in less than a fortnight that the issuer has failed to drum up enough demand to cover a deal, following its €500m no-grow 0.01% April 2031 note.

One of the issues the borrower faces in attracting enough demand to cover its trades is that several potential investors do not have lines to buy the issuer’s bonds, according to the banker.

“Another is that there’s no credit rating on the bonds, which also takes away some investors that look for a specific bond rating in order to buy the transaction," he said.

“There are not many issuers that don’t have ratings on the bonds, especially if they do more benchmarks. But in the past you didn’t always need it.”

The borrower is rated AAA by S&P, with a negative outlook.

The European Investment Bank brought the other deal on the day, reopening its £2bn 1.375% March 2025 note for a minimum £250m tap.

Final demand was in excess of £535m (including £50m JLM interest), allowing for the deal to be sized at £300m.

Bank of America, BMO and RBC marketed the deal with a spread of 22bp (the number) over the 5% March 2025 Gilt.