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The first issuance of sovereign green bonds of the current financial year sailed through with the government raising Rs 5,000 crore through five-year papers at a coupon of 7.25 per cent. Investors did not offer much greenium for the issuance.
The yield on the 5-year government bond closed the day at 7.27 per cent.
“The cut-off was along the expected lines. The greeniums have been shrinking globally. The bonds are illiquid in nature,” Vikas Goel, managing director and chief executive officer at PNB Gilts Ltd, said.
As part of its borrowing programme of FY24, the government is set to raise Rs 20,000 crore via sovereign green bonds. This issuance shall comprise Rs 10,000 crore of 30-year green bonds, and an additional Rs 5,000 crore each of bonds with maturities of 5 years and 10 years.
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In the previous financial year, the government had raised Rs 16,000 crore by issuing two tranches of 5-year, and 10-year bonds. The greenium, which signifies the premium investors are willing to pay for green bonds because of their sustainability impact, reduced from 6 basis points in the first tranche to just 1-5 basis points in the second tranche.
“This time the market knew that there won’t be any greenium because the bond doesn’t offer anything extra,” a dealer at a state-owned bank said. “The banks keep them in their HTM (held to maturity) book. There has been no trading of the bonds in the secondary market since last year,” he added.
Funds generated via the sale of green bonds will be allocated to public sector projects aimed at decreasing the carbon footprint of the economy.
