Government bonds classified as sustainable or ESG securities continued to win market share during the third quarter as more of them were issued while the total amount issued in fresh state debt in Europe declined.
Governments of EU member states and the UK issued a total of 745 billion euro in bonds and bills during the third quarter. That’s down 9.3 per cent from the same period last year and 4.7 per cent lower than the second quarter, accordinging to the latest quarterly bonds data report by the Association for Financial Markets in Europe, known as Afme.
While total issuance declined, new government debt issued as sustainable, ESG bonds reached 317 billion euro in the third quarter, up from 296 billion during the second quarter and 216 billion in the same period last year.
Italy leads new ESG issues
Afme’s list of new ESG bonds issued during the third quarter included 196 green bonds, 92 bonds under the EU Sure Covid-19 support programme, 26 bonds issued under the Next Generation EU programme, and three sustainable bonds.
New issues in Italy (6 billion euro), Germany (5 billion) and Belgium (4.5 billion) and 5.7 billion euro in tap issuance in the UK were the main drivers of growth in green volumes. Italy’s new issuance brought its total holdings in green government bonds to 19.5 billion euro, making it the fourth largest issuer in Europe after France, Germany and the UK.
During the third quarter, traded volumes in bond market decreased 9 percent compared to the second quarter but jumped 19 percent compared to the same period last year. The traded amount was the highest third-quarter average daily trading volume in European government bonds since records began in 2014, said Afme, referring to Trax data from Marketaxess.
Government bond trading activity in the UK reached a 28-month high in the week commencing 30 September, increasing 99 percent week-on-week, amid heightened volatility and a significant amount of repricing in the UK sovereign sector.