By Yoruk Bahceli and Antonella Cinelli
ROME/AMSTERDAM (Reuters) -Italy raised 10 billion euros ($11 billion) from a new green bond and Cyprus launched its first sustainable bond on Tuesday as governments took advantage of investor demand for such assets following weeks of wild swings in bond markets.
Italy saw over 52.9 billion euros of demand for the eight-year green bond, a lead manager said, double what the country received for mainstream bond sales in January and February.
James Farrelly, sovereign, supranational and agency syndicate at Credit Agricole, a lead manager, said the green format allowed Italy to sell a bigger deal.
“The big difference here was on the quality of volume that we could have offered to the Treasury,” Farrelly said, estimating that all else being equal, Italy would have raised a smaller size through a conventional bond.
UniCredit analysts had expected Italy’s bond sale to raise up to seven billion euros.
Green bonds, which fund environmentally beneficial projects, help borrowers tap an additional pool of sustainability investors focused exclusively on such assets, which can help boost demand in volatile markets and provide a pricing advantage.
Italy’s bond, which marks its third green bond and matures on 30 October 2031, was priced to yield 4.056%.
Elsewhere, Cyprus raised 1 billion euros from its first sustainable bond, according to a lead manager, becoming the latest European government to enter the market.
Sustainable bonds are a broader form of environmental, social, and governance-focused (ESG) debt, proceeds from which can be spent on both green and social projects.
Cyprus, which saw investor demand of over 12.5 billion euros, follows a number of smaller countries including Slovenia and Luxembourg opting for sustainable bonds as they often struggle to find enough projects to back standalone green bonds.
The 10-year bond, which matures on 13 April 2033, was priced at a spread of 125 basis points over the mid-swap level, the lead manager said, down from 140 when the sale started.
The deals follow a green bond sale by the European Union last week that also saw strong demand.
It was not just governments that were keen to tap the ESG debt market. BNP Paribas on Tuesday raised 1 billion euros from a green, loss-absorbing bond, according to a lead manager.
It marked the first subordinated issuance since Credit Suisse’s wipeout of its AT1 bondholders, another type of loss-absorbing debt, roiled investors in March.
($1 = 0.9142 euros)
(Reporting by Yoruk Bahceli, Antonella Cinelli and Valentina Consiglio; editing by Federico Maccioni and Christina Fincher)