German Bank KfW announced today that it has issued a 10-year $2 billion green bond, its first USD issue of 2020. The bank stated that demand for the bond was very strong, with the issue more than 3x oversubscribed despite the large size of the offering. To date, KfW has issued EUR 5.2bn equivalent in Green bonds so far this year in 6 currencies.
Tim Armbruster, Senior Vice President and Treasurer of KfW, said:
“Our new USD bond reiterates our strategic approach to the Green Bond market – investors appreciate the liquidity in our green bonds, not only in EUR but also in USD. This is reinforced by the more than three times oversubscribed orderbook of the USD “Green Bond – Made by KfW”, which was especially well received by green asset managers.”
After years of consistent strong growth, the market for sustainable bonds, and green bonds in particular, suffered a significant decline in Q1 2020, as the COVID-19 crisis shut down demand. Q2 saw a significant recovery in the market, however, driven primarily by sustainability and social bonds, while green bond volumes rebounded as well, but remained below last year levels.
KfW reported that the orderbook for the offering reached $6.7 billion, the largest ever for a KfW USD green bond as well as the largest ordebook for a 10yr USD SSA so far this year. The strong demand enabled the bank to tighten the pricing of the offering by 3bps, to a final spread of MS+16bps, or a pick-up of 14.75 bps over Treasury.
Over 128 investors participated in the offering, with those classified as green or ESG investors representing 65% of the final allocation.