First Green German Bond Might Come Cheap After Market’s Selloff

(Bloomberg) -- Investors may be able to scoop up Germany’s first green bonds for cheap next week as Europe’s debt issuance intensifies following the summer trading lull.

The nation could issue 4 billion euros ($4.75 billion) of green debt, according to Commerzbank AG. Yields would be set partly against regular 10-year peers that just had their biggest weekly rise in nearly three months, and topped up with a premium from the Treasury.

Euro-area bond yields climbed this week and curves steepened as economic indicators improved, signaling optimism that the recovery is on track. They’ve also been propelled upward by the Federal Reserve’s shift to a more relaxed approach on inflation.

Yet the green bonds could see their price increase, said Christoph Rieger, head of fixed-rate strategy at Commerzbank in Frankfurt.

“Many green investors are buying bonds as buy-to-hold and the European Central Bank is also keen to increase its green footprint via its purchase programs,” he wrote in a client note. “All this argues for a higher scarcity value.”

Italy may also issue syndicated debt for the first time since June, according to Danske Bank A/S, when the nation saw record orders for such a sale.

Such offerings would seek to take advantage of coupons and payments on over 50 billion euros of bonds payable next week by Italy and Germany, which investors will then need to reinvest.

Debt Sales

Euro-area bond sales including inflation-linked notes are due from Germany, France and Spain next week and set to total around 22 billion euros, according to Danske. The bank also expects Germany to sell its inaugural 10-year green bond via banks, and Italy to issue a long-maturity note for 10 billion euros.

• The U.K. will offer over 5 billion pounds ($7 billion) of debt across three sales next week and the BOE will buy back 4.4 billion pounds of debt across three operations
• Data for the coming week in Germany and the euro area is led by inflation numbers
  • German inflation figures for August are set for Monday followed by euro area numbers on Tuesday, which also brings final manufacturing PMIs; final services PMIs are due Thursday
  • U.K. markets are closed Monday for a holiday and the week sees mostly second tier data alongside final manufacturing and services PMIs on Tuesday and Thursday respectively
• ECB policy makers are represented by Klaas Knot who speaks on the economy on Tuesday and Jens Weidmann who will talk on Wednesday
  • BOE policy makers speeches are numerous next week and will be watched for clues on policy following Governor Andrew Bailey’s remarks on Friday that more stimulus could be added; Bailey, Alex Brazier, David Ramsden, Gertjan Vlieghe and Ben Broadbent all speak on Wednesday, with Bailey also appearing on Thursday. Ramsden speaks again on Friday as does Michael Saunders
• DBRS Ltd. reviews Spain’s sovereign rating and S&P Global Ratings reviews Finland on Friday

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