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Proceeds from the sale will be ring-fenced for
projects such as clean energy, and will also help Britain's
government burnish its green credentials before it hosts the
United Nations COP26 climate conference in Glasgow in November.
Britain has lagged behind other European countries such as
Germany, Italy and Spain in issuing this type of debt, partly
because of concern that investors would want higher interest
rates to compensate for a relative lack of liquidity.
But Tuesday's launch of a new gilt maturing in July 2033
represents the largest single sale by a sovereign issuer,
topping the previous 8.5 billion euro record set by Italy in
March.
"It's confirmation that the demand is there even in sterling,
not just in euros," said Antoine Bouvet, senior rates strategist
at ING.
Based on the secondary market, he estimated the deal was pricing
in a roughly 3 basis point "greenium" -- the slightly lower
yield green bonds offer versus conventional debt, usually driven
by a dedicated investor base chasing a limited supply of these
assets.
Britain has said it aims to raise around 15 billion pounds in
total from two green gilt launches this year - Tuesday's sale
and a new 20- to 30-year maturity green gilt next month.
This issuance will be only a small fraction of the total 253
billion pounds of gilt sales planned for this financial year.
The new 2033 gilt will pay a coupon of 0.875% and will be priced
to yield 7.5 basis points more than the conventional June 2032
gilt, a yield premium which reflects the longer maturity rather
than a lack of liquidity for the new issue.
The Bank of England has said it will buy the green bonds as part
of its asset purchase programme and treat them like similar
conventional ones.
($1 = 0.7305 pounds)
(Reporting by David Milliken, editing by Andy Bruce)
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