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By Yoruk Bahceli and Antonella Cinelli
ROME/AMSTERDAM (Reuters) – Italy launched a new green bond and Cyprus its first ever sustainable bond on Tuesday as European governments tapped strong investor demand for such assets to raise debt following weeks of wild swings in bond markets.
Italy saw over 35 billion euros of demand for a new, eight-year green bond, a lead manager said, its third issuance in the format backing environmentally-friendly spending.
The bond, which matures on 30 October 2031, will price to offer a spread of 8 basis points over Italy’s outstanding bond due August 2031, a lead manager said, down from around 10 basis points when the sale started.
UniCredit analysts said they expected Italy to raise six billion to seven billion euros from the sale.
And Cyprus launched its first ever sustainable bond which will raise 1 billion euros, according to a lead manager, becoming the latest European government to enter the sector.
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, which have opted for sustainable bonds as they often struggle to find enough projects to back standalone green bonds.
The 10-year issuance, which matures on 13 April 2033, will price at a spread of 125 basis points over the mid-swap level, the lead manager said, down from 140 when the sale started.
Against a backdrop of significant market volatility that has muted debt sales recently, the green format helps attract a wide range of investors, said a banker involved with the Italian deal, who asked not to be identified.
In addition to mainstream bond investors, green and broader ESG bonds 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.
The deals follow a green bond sale by the European Union last week that restarted syndicated debt sales from public sector borrowers after banking turmoil on both sides of the Atlantic shook markets.
(Reporting by Yoruk Bahceli, Antonella Cinelli and Valentina Consiglio; editing by Federico Maccioni and Christina Fincher)
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