Burhan Khadbai

The European Investment Bank has been at the forefront of guiding and advancing the green and sustainable bond market, becoming the first issuer of a green bond back in 2007.

Wider spreads and volatility have been named as the biggest concerns for borrowers in the year ahead, according to OMFIF’s 2025 Public sector debt outlook survey.

Low spreads for issuers but attractive coupons for investors drives record start to 2025

The UK Debt Management Office’s first public sale of the year impressed with an unprecedented level of demand despite a huge sell-off in gilts over recent months.

Increasing international demand – particularly from Asian investors – is boosting the status of Europe’s safe assets. This comes as a result of a scarcity of high-quality, liquid securities and the desire to diversify away from dollar-based investments.

German regional borrowers are bracing themselves for what will be a challenging year ahead to fund their issuance programmes in the capital markets. Elevated spreads and an upcoming federal election, likely to trigger reform of the fiscal debt brake, add to the uncertainty.

The market reaction to one of the most highly anticipated UK budgets in recent years was always going to be closely followed. While the impact was some distance from the catastrophic mini-budget of 2022, there was still a degree of concern, surprise and unease among investors.

Widening budget deficit and higher debt outlook puts OATs under pressure

While the European Union was dealt a blow earlier this year when both Intercontinental Exchange (ICE) and MSCI declined to add the EU to its government bond indices, there is hope that the EU will still achieve sovereign index inclusion sooner rather than later – perhaps as early as 2025.

One of the biggest obstacles to the growth and wider adoption of sustainability-linked bonds by sovereigns is the difficulty in assessing the true value of these products.