The Middle Easts First Sovereign Green Bond Sees Strong Demand

September 29, 2020

Investors bid for over $3.7 billion of Egypts green debt

Nation priced $750 million five-year notes at 5.25% on Tuesday

Egypt pulled in orders for nearly five times the $750 million size of the Middle East and North Africas first sovereign green bond, as it pushes ahead with anti-pollution and renewable energy projects.

The Arab worlds most populous nation sold the five-year notes at a yield of 5.25%, well inside an opening target of about 5.75%, after amassing more than $3.7 billion of investor orders. The sale put Egypt on the map of sustainable financing, the Finance Ministry said.

Among those attracted were a new investor base from Europe, the U.S., East Asia and the Middle East, as well as asset mangers, pension, investment and insurance funds, the ministry said in a statement. Such high-quality, long-term investors will reduce price volatility.

The bond forms part of Egypts strategy to lock-in new financing sources and broaden the countrys investor base, steps that could in turn help lower its borrowing costs. Its touting a $1.9 billion portfolio of potential green projects, including clean transportation, renewable energy and sustainable water management.

Egypt joins a growing green bond wave with Tuesdays sale, as global investor interest in cleaner financing surges. The assets of sustainable index mutual funds and exchange-traded funds have doubled to $250 billion in the past three years, according to Morningstar.

the questions :

1.The Yield on the Egyptian Green Bonds is 5.25%. According to the article, the opening target was 5.75%.

2. Why do you think the Yield went down from 5.75% to 5.25% (What does this mean)? What caused this decrease?