Spain Plans to Raise 5 Billion Euros From Debut Green Bond Deal
(Bloomberg) -- Spain is set to raise 5 billion euros ($5.9 billion) from its debut green bond this week, according to two people familiar with the matter, the first in a flurry of sovereign sales expected this month.
The deal for the 20-year note, which was announced Monday, should launch Tuesday, one of the people said, asking not to be identified due to internal policy.
Spain will join Italy and France in offering green debt this year, which have helped drive sales of syndicated ethical bonds in Europe to a record 286 billion euros. The U.K. is preparing an inaugural sale this month, while established issuer Germany will auction a new 10-year offering this week.
“This will confirm that demand is there for other large green bond issuers testing the market,” said Antoine Bouvet, senior rates strategist at ING Groep NV. “The first Italian green bond saw almost 10 times demand when it was launched.”
Bouvet said the bonds will have fair value if yields are three basis points lower than their conventional peers, and are worth buying if they rise above that. Green bonds typically offer slightly lower rates given strong investor demand, in a so-called greenium.
The sale is going ahead as preparations for Spain’s next budget are now advancing, after the deal previously faced roadblocks due to delays in passing the spending plan. That was because proceeds from the offering need to be spent on specific initiatives tackling climate change, which hadn’t been detailed by the government at that time.
Sovereign green sales in September could total at least 20 billion euros, according to Imogen Bachra, a rates strategist at NatWest Markets. That would test the current monthly all-time high, set in March, when Italy’s debut pulled in the biggest-ever orderbook for green bonds.
Charles Diebel, a money manager at Mediolanum, said high demand for Spain may drive up prices and reduce the offering’s appeal.
“The valuation is likely to be too rich for my blood,” he said.
The offering will be handled by Barclays Plc, Banco Bilbao Vizcaya Argentaria SA, Credit Agricole SA, Deutsche Bank AG, JPMorgan Chase & Co. and Banco Santander SA.
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