Germany completed its green bond programme for 2026 on 20 October with its ninth auction of the year, following eight previous ones and a syndicated operation. The Finanzagentur reopened the green Bunds maturing in August 2053 at 1.8% and in April 2029 at 2.1%, for an amount of 500 million euros each, raising their outstanding volumes to 14 billion and 8.5 billion euros, respectively. These reopenings will raise the total volume of Germany's green bonds from 95.3 billion to 96.3 billion euros and the annual issuance to 17 billion euros, compared to 14.5 billion euros in 2025, comfortably within the initial target range of between 16 billion and 19 billion euros. We expect solid demand, although the average coverage ratio for 2026, at 2.1 times, remains below the 2.6 recorded in both 2024 and 2025. The combination of predictable supply and a broad investor base should support an orderly final auction, rather than generating a price premium driven by scarcity.
The nine green bonds currently outstanding from Germany make up the steepest green sovereign yield curve in the eurozone, offering investors access to a wide spectrum of maturities. France has only five green bonds outstanding but has a larger aggregate volume of nearly 108 billion euros and remains the eurozone sovereign with the highest issuance in 2026, with over 20 billion euros issued to date. Therefore, Germany leads in curve depth and tradability, while France leads in market size, a distinction that should keep both issuers in a central position within portfolio construction in this segment.
The concept of Germany's twin bonds underpins this strong market position: each green bond has the same maturity, coupon, and repayment profile as an existing conventional bond. This allows investors to directly compare both bonds, obtain an accurate measure of the greenium, and avoid much of the liquidity uncertainty that often affects labelled or thematic debt. Along with the depth of its curve, this structure makes the German market one of the most transparent and sophisticated green sovereign segments in the world. It also enhances the investment appeal by allowing investors to add ESG exposure with limited risk in terms of reference and liquidity.
The January 2026 update of Germany's Green Bond Framework preserved these fundamental characteristics while increasing transparency and aligning the programme with current sustainable finance standards. The revised framework follows the updated ICMA Green Bond Principles, reinforces alignment with the EU Taxonomy, and improves reported information through earlier disclosure of eligible expenditures and additional external verification. These measures should bolster investor confidence, broaden the potential buyer base, and help Germany maintain its leadership role as disclosure standards become more demanding.
Eurozone sovereign green bond issuance has surprised on the upside, reaching 61.3 billion euros so far this year, compared to 51 billion euros recorded for the whole of 2025. In the third quarter alone, issuance amounted to 21 billion euros, an unusually high volume for a period that is typically quiet in terms of placements. Including the two upcoming reopenings of German green Bunds, issuance will reach approximately 62 billion euros, already surpassing our annual forecast of 60 billion euros. Operations still in preparation should raise the final figure above that estimate by several billion euros and set a record of at least 65 billion euros.
Eight eurozone countries have issued sovereign green bonds this year: Austria, Germany, the Netherlands, Ireland, Spain, France, Italy, and Latvia, while Slovenia, Belgium, and Luxembourg maintain green bonds outstanding but have not returned to the market in 2026. France, Germany, Italy, Latvia, and Spain launched five new issuances, and the European Union continued to be a significant provider through its NextGenerationEU Green Bonds programme. As a result, the total volume of eurozone government green bonds has risen to nearly 390 billion euros. Nevertheless, this segment remains a niche, representing only about 4% of the total sovereign issuance in the eurozone, while its average residual maturity of nearly 13 years leaves investors with significantly greater duration exposure than conventional government bonds.
Our central scenario anticipates significant supply in 2027 as increased public spending on infrastructure encourages major issuers to expand and strengthen their green bond curves. The European Union could add a new line of NextGenerationEU Green Bonds if member states report a sufficient volume of eligible expenditure, although the total volume of its issuances should decrease as the programme approaches its conclusion.
For investors, sustained net supply should improve liquidity and diversification, but also reduce scarcity, thereby limiting the scope for a lasting expansion of greeniums.
The greenium (the yield difference between a green bond and its conventional equivalent) has remained positive but generally stable throughout 2026 for both German sovereign bonds and those of other eurozone countries. Germany's twin bond structure provides the most accurate comparison: recently, greeniums have generally ranged between 0 and 2 basis points, well below the levels observed in the early years of this market. A larger and more mature market, broader participation from investors, and the steady increase in supply from European sovereigns and the European Union have reduced scarcity and compressed this premium. However, demand remains strong because institutional investors can meet their ESG objectives with very limited impact on returns. For example, the green bond issued by Italy in September attracted orders exceeding 112 billion euros.
Looking ahead, our base scenario anticipates that greeniums will remain close to current levels, as strong structural demand continues to absorb abundant but predictable supply. A significant widening of this premium would likely require a shock in issuance or a weakening of ESG demand, while renewed scarcity could temporarily increase it.
Therefore, we favour green bonds primarily for their advantages in terms of diversification, liquidity, and alignment with investment mandates, rather than for the expectation of achieving significant additional returns compared to their conventional equivalents.
