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BONDS

Spain reaps rich rewards in bond auction

Spain raised €4.714 billion ($6.189 billion) via the sale of medium- and long-term bonds on Thursday at lower interest rates, a sign of improved investor sentiment regarding the country's ability to manage its finances.

Published: 18 April 2013 13:14 CEST

The Treasury sold €1.29 billion worth of 10-year bonds at an average yield of 4.612 percent, down from 4.898 percent at the last similar auction on March 21.

It was the lowest yield on Spanish 10-year bonds since September 2010 when the rate hit 4.144 percent.

The Treasury sold €2.043 billion in five-year bonds at an average yield of 3.257 percent, down from 3.557 percent during the last comparable auction on March 21.

It also raised €1.381 billion in three-year bonds at an average yield of 2.792 percent, down from 3.019 percent on April 4.

The Treasury had expected to raise €3.5–4.5 billion via the bond auctions.

Spain's borrowing costs have fallen since the European Central Bank announced in September its readiness to buy an unlimited amount of bonds from troubled member states that accept strict conditions.

The risk premium — the extra rate demanded by investors in Spanish 10-year bonds over the rate offered by equivalent German Bunds — stood at 344 basis points, down from 345 basis points when markets closed on Wednesday.

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CLIMATE

Swedish central bank sells bonds ‘for climate reasons’

Sweden's Riksbank has sold government bonds issued by Canadian and Australian states "for climate reasons", in one of the first cases of a central bank joining the global divestment movement.

Published: 15 November 2019 13:09 CET
Swedish central bank sells bonds 'for climate reasons'
The Bulga Coal complex in New South Wales, Australia. Photo: Glencore
Deputy Governor Martin Flodén revealed on Wednesday that the bank had in April divested itself of bonds issued by the Canadian province of Alberta, and more recently sold bonds issued by the Australian states of Queensland and Western Australia. 
 
“We will not invest in assets issued by issuers with a large climate footprint,” he explained in a speech at Örebro University on Wednesday.  “Australia and Canada are countries that are not known for good climate work. Greenhouse gas emissions per capita are among the highest in the world.” 
 
Flodén said the move followed a decision last year by the bank's executive board to take sustainability into account when making investment decisions. 
 
“We can contribute to the climate work to some extent by giving consideration to sustainability aspects when investing in the foreign exchange reserves,” Flodén said. “We are now doing this by rejecting issuers who have a large climate footprint.” 
 
Alberta's tar sands are some of the most polluting hydrocarbons in the world, while Queensland and Western Australia host some of the world's biggest coal mines. 
 
In a statement emailed to reporters, Christine Myatt, spokeswoman for Alberta Premier Jason Kenney, insisted that Alberta had the “highest environmental standards in the world”.  
 
“If the Swedish central bank is really concerned with making a difference on climate change they need to be investing more in ethical producers such as Alberta which have shown dramatic gains in reducing emissions,” she said. 
 
The City of Örebro was the first Swedish city to commit to pull its funds out of fossil fuels, following the example of cities like San Francisco, Seattle and the Dutch town of Boxte.

 
In his speech, Flodén said he had doubts about taking a more active approach to sustainability, and investing foreign exchange reserves directly “in particularly climate-friendly assets, such as green bonds.” 
 
Sweden's reserves, he explained, are currently invested solely in government bonds, something the bank was reluctant to change.  
 
“This is partly to hold down financial risks, and partly because monetary policy, apart from determining the general interest-rate level, should disturb pricing on the financial markets as little as possible.” 
 
This means that central banks can only have a limited role in pushing the world towards a greener economy, he said. 
 
“This is entirely natural,” he said. “The important decisions on how climate change should be counteracted in Sweden are political and should be taken by the government and the parliament.”
 
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