GlobalCapital, is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Germany’s public sector issuers lead from the front

At the end of June GlobalCapital and DZ Bank brought together some of Germany’s leading public sector bond issuers to discuss the impact of the coronavirus pandemic on their capital markets activities. Four months after the crisis began to be felt in Germany, representatives of the country’s development banks and Länder have come through the initial panic and reaction stage and are now beginning to understand more fully the extent of the damage the disease has caused to the economy and just how much their day-to-day lives have changed.


For most of the participants in this roundtable, their response has been to get on with borrowing in significant size to help finance the saving of jobs, companies, public services — people’s ways of life. Many of Germany’s public sector borrowers were first out of the gates into the bond markets as the crisis began to hit western Europe. 

Thanks in part to the European Central Bank’s bond buying programmes, investors have risen to the occasion and met the demand for more issuance. But they have also proved receptive to new structures, including Covid-19 response bonds. They have looked on as politicians have debated how to best support Europe through these extraordinary times — including vast rescue funds — as well as at the potential prospect of Eurobonds and closer political union. 

As the first phase of the crisis comes to an end, many across Europe are looking enviously at the way Germany has managed to unlock its restrictions earlier, how it has coped better with the coronavirus disease and how its economy will surely recover faster — all of which should mean that all the institutions in this discussion benefit through better ratings, higher demand and lower coupons.

That this roundtable discussion was held remotely, using a video conferencing platform, is arguably emblematic of this ability to adapt well. That it has proved a more than adequate substitute to not just convene participants but allow for debate and exchange of views mirrors participants’ positive experiences over the past few months — a period during which they have had to get used to a new way of working, whether executing deals or updating their investors amid rapidly changing economic conditions, as a result of plunging tax income and vastly higher spending.

Participants in the roundtable were:

Besnik Berisha, head of funding, NRW.Bank

Stefan Goebel, managing director, treasurer, Rentenbank

Edgar Kresin, treasurer, State of Saxony-Anhalt

Alexander Labermeier, treasurer, State of Hesse

Johannes Lischke, head of money and capital markets, Investitionsbank Berlin

Friedrich Luithlen, head of debt capital markets, managing director, DZ Bank

Otto Weyhausen-Brinkmann, head of new issues, KfW

Moderator: Toby Fildes, GlobalCapital


GlobalCapital: How have your issuance plans changed since the pandemic?

Alexander Labermeier, State of Hesse: In mid-March, as the pandemic crisis really began to be felt in Germany, policymakers swung into action, promising support for business and communities via initiatives such as tax cuts, loans and grants. 

We had all seen the terrifying pictures coming in from Italy and other countries and although we could not be sure just how Germany would be affected, we had to bolster our liquidity positions.

In effect, we have been hit from all angles — less tax income, through a decline in either economic activity or the amount of tax charged, and vastly higher spending. As a result, we very speedily changed our issuance strategy. We quickly stepped up, tapping two existing 0% benchmarks, raising €3.5bn within four days on March 20 and 24, in what were very turbulent market conditions. Nevertheless, we achieved very strong backing from the market. 

We decided to go out straight away, without any of the usual pre-sounding the day before, and we got it done very fast, enabling us to build up a substantial buffer to help us deal with the impact of the pandemic.

Otto Weyhausen-Brinkmann, KfW: We were mandated by the federal government in March 2020 to provide loan facilities to companies in Germany affected by the Covid-19 pandemic. 

These loans, actually referred to as the KfW Special Programme, clearly dominate our promotional business activities this year, and represent one of the largest challenges KfW has ever faced. As of today, we have received more than 67,000 individual loan applications, equivalent to approximately €50bn. 

While that’s dominating our loan business, on the other hand the Federal Ministry of Finance is authorised to finance KfW’s funding requirement resulting from the special programme up to an amount of €100bn through the new government-owned stabilisation fund, WSF. In addition, KfW has also participated in the European Central Bank’s Targeted Longer-Term Refinancing Operations scheme, given its very favourable funding conditions.

As the crisis was peaking in Germany, we issued two euro benchmarks within two weeks of each other, giving us liquidity of €9bn. With these additional measures, we are now running a very robust liquidity position. As a result, and this might be slightly counterintuitive, given what is going on in the world, we have been rather quiet recently in terms of issuance.

Besnik Berisha, NRW.Bank: We had to slightly adjust our funding targets when the crisis peaked. We started the year with a funding volume of €10bn-€12bn, below the ranges of the last couple of years, which have been €13bn-€15bn equivalent. 

This was just due to the fact that our maturity profile was a bit lower and the funding needs from the lending side were projected to be lower.

So when the crisis came to Europe, we felt we had to do something especially on behalf of the State of NRW and try to promote small and medium-sized enterprises and corporations, in regard to social and public infrastructure, and also for municipalities, which were beginning to get hit from lower tax income.

So we readjusted the level to €13bn-€15bn again. But of course, it will depend on the lending side, and this in turn will depend on how the second half of the year develops in terms of the crisis — whether we are going to see a second wave of infections.

Markets in March adjusted quickly to these circumstances. Although spreads peaked in March, and it looked like there was some turbulence, most supranational, sovereign and agency bond deals we have seen have gone quite smoothly, with order books heavily oversubscribed. And when the ECB came in [with quantitative easing], things got better and better.

We decided to remain on the sidelines during the period of elevated spreads — we were quite well funded, since we had had a busy January for issuance. It wasn’t as if we knew something the market did not — it was just that we kicked off the year strongly and had done a lot of funding within our local German documentation. So we were well funded and therefore we had the opportunity to just hit the brakes and do nothing, and wait for the spread environment to tighten in a bit. 

We started at the end of April and beginning of May to print quite large volume tickets. So we are very progressed now in terms of funding, with around €10bn.

Q&A with Besnik Berisha, Head of Funding, NRW.BANK

Edgar Kresin, State of Saxony-Anhalt: For us it is a similar story to the State of Hesse — March and April saw a lot of changes to our revenue and expenditure, due to the high levels of uncertainty. The net result was that we brought our liquidity funding plans forward from the third and fourth quarters this year to March and April. 

In normal circumstances, we prefer to have liquidity that matches demand; but we changed that approach, as we felt we needed to have cash on hand to cope with the impact of the crisis. 

So we issued a benchmark bond in March that met all our funding requirements. As we are a fixed rate payer as a state, we are not so spread-sensitive and of course the yield environment in March was low, around zero, which is quite nice for fixed rate payers. It’s even lower now, of course. But the key point is that German states such as ourselves, Hesse and NRW were all able to fund ourselves, even during the extremely difficult period in March when markets were experiencing extreme volatility.

Stefan Goebel, Rentenbank: The initial plan for 2020 had been to raise up to €11bn, and after some back and forth, it seems that this is still the right number. 

So our borrowing needs will not go up beyond what we had communicated in 2019. And that is mainly because in our lending, we see a trade-off between Covid-19-related additional lending activities on one hand, and reduced demand for loans financing long-term investments on the other. 

What’s more, many areas of agriculture have so far done remarkably well during the crisis. There were concerns regarding the potential shortage of harvest hands in March, which typically come from countries like Romania. 

However, the Federal government dealt with that in a quick and pragmatic manner, which meant we could all enjoy the asparagus season actually, which I personally also like quite a lot!

So in a nutshell, as we do not see a lot of demand for Covid-related financial aid from agriculture, our funding volume remains stable. 

And as we were quite well funded in March, we decided to stay away from the benchmark market when spreads widened and focused on smaller transactions instead. However, we capitalised on an opportunity in the dollar market in May, when we were able to issue a quite successful $2bn five year benchmark.

GlobalCapital: Fritz and Johannes — a couple of people have mentioned that they found markets reasonably receptive during this period of uncertainty. Was that your experience?

Fritz Luithlen, DZ Bank: Yes, we found the markets reasonably constructive throughout March. It is quite interesting to note that spreads peaked in March. But if you look at economic numbers, the major news around things like the reduction of GDP came out in April. So well done markets for the anticipation of this!

Operationally, as a community, the capital markets have done a good job in handling transactions, often working apart from each other and from the home office through mobile devices, which isn’t trivial, because there’s a compliance issue. 

If you do stuff over an iPad or a mobile phone line, you’re probably doing it outside the purpose-built secure infrastructure you have in the office. That has mostly been overcome successfully. 

So overall, we are very happy with how it went. Yes, there have been elevated spreads, but the market has remained functional and constructive.

Johannes Lischke, Investitionsbank Berlin: Markets have been available most of the time. We did notice in mid-March, maybe for two weeks, a period when market participants, including our own traders as well as debt capital markets professionals, were seeing their offices closed down and had to set up home working. During that time, I think, the willingness to do transactions was slightly reduced. 

But by the end of March, we saw activity pick up again. Although spreads were at higher levels, there was very much a willingness to perform transactions.

Kresin, Saxony-Anhalt: An important point to make is the impact that the European Central Bank’s Pandemic Emergency Purchase Programme had on our markets. 

Before it was established, a number of German states issued at relative high spreads. As I said before, we are fixed payers, so it was OK for us — we are not as spread-sensitive as other SSAs. But there was no secondary market for our bonds for pricing reference. That all came back with the Pepp programme from the ECB.

Weyhausen-Brinkmann, KfW: We felt that markets were effectively shut for a couple of weeks when the crisis really hit. Clearly there was a lot of stress in the system: corporations were in urgent need of liquidity and we saw heavy outflows from mutual funds, for example. 

However, central banks across the world calmed things down by offering liquidity, stepping in as lenders of last resort and the ultimate buyers of bonds. Once this happened, confidence came back very quickly.

At the same time, as Johannes mentioned, we all had to deal with another type of disruption — operational disruption while we got used to working from home. 

From KfW’s point of view, we were just not used to working or issuing bonds from home at all. Neither were the underwriters. We had two weeks during which the first questions we discussed with our underwriters were: “Are you actually able to operate?”, “Where are you working?” and “What about the investors — are they able to invest?”

Of course, now we know that markets have been able to cope with all of this very well — it’s all running very smoothly.

One of the main reasons we have been able to transition fairly quickly is that communication has always been very electronic — over the phone or through e-books. So in the end, it doesn’t matter where someone is sitting.

Labermeier, Hesse: In situations like the one in March, we had a choice between waiting or doing something. We didn’t know when or whether the ECB was going to step in and, meanwhile, we saw politics making large promises on the tax and expenditure side, with the pandemic situation changing every day.

We had shut down in Germany on March 15. On March 20, the first day of the next week, we decided to do our first €1.75bn step-up bond. It proved to be the right decision to act very fast, because the politics can only promise to pay out taxpayers’ money if it’s in your account.

In regards to the home office situation, we had trained for this years ago when a World War II unexploded bomb was found next to our building, which forced the offices to be closed at very short notice. 

This shock situation forced us to adapt, to the extent that we switched to online processes, and are now able to work remotely seamlessly. 

So we have stress-tested the kind of situation we find ourselves in today in a very dynamic way. We were fortunate to have done so.

Kresin, Saxony-Anhalt: The German states also began to step up their communication with each other. Normally we talk once a week to each other, all 16 states (and the Federal Government) on the treasury side. In these times we changed to two calls a week, to make sure that all of us were able to handle the extraordinary situation. The reaction has been very fast and very clear.

Luithlen, DZ Bank: We certainly saw the German states come very quickly out of the blocks — they grabbed the bull by the horns, and issued in a very constructive manner, despite the large dislocations in the market. Corporate issuers also came out very quickly and constructively.

GlobalCapital: How markets coped during that crucial period when people were having to adjust to working from home amid savage volatility and turbulence is one of the more impressive — but also fascinating — aspects of the crisis. But another interesting development to come out of this crisis is the Covid-19 response bond. Fritz, you worked on one of the earliest to emerge. What has been your experience working on these types of transactions?

Luithlen, DZ Bank: Yes, indeed we did one of the earliest ones, for the International Finance Corp — I think it was the second week of lockdown and we did a $1bn three year transaction in a social bond format dedicated to Covid relief. 

The execution went, as you would expect — very well. It was an ESG bond that did what it said on the tin. There weren’t many questions around it like “what does it do, how do you use the proceeds, what’s the reporting like?” Investors took it for what it was and invested very quickly.

Berisha, NRW.Bank: We haven’t issued social bonds so far but we started discussions within the bank in the autumn of 2019 about whether we should be a regular social bond issuer alongside being a regular green bond issuer. 

When the Covid-19 crisis arrived in February and March, we also talked a lot about whether we should be a kind of first mover in the German SSA sector and bring a social bond related to Covid-19. 

It was a constructive discussion but we decided not to proceed at this time. We thought it was not worth jumping on a running train and doing something very thematic. However, we are still planning to issue our inaugural social bond shortly.

Labermeier, Hesse: We get questions from banks asking us to consider social bonds who tell us that all it would require would be two weeks of paperwork. But my feeling is that it is more complicated than that. 

On one hand, I would say that all bonds issued by German states could clearly be classed as social bonds because of what we use our expenditure for. Take Hessen, for example — we pay out more for the school system, for social care and for universities than our gross issuance numbers. But it’s not so easy, because you have to look at identifiable projects; investors want to see clear progress and numbers.

At the same time, our ruling coalition, the Christian Democrats and the Green Party, has tasked us to submit a green bond and we are right now structuring that. It’s complicated and it involves a lot of research and homework. So instead of looking at doing a Covid or social bond, we are concentrating our efforts on the green bond project.

Kresin, Saxony-Anhalt: My first comment would be: if you would like to invest in Covid bonds, then you should just buy Bunds — and then you have around 50% of Covid bonds. The second is that for Saxony-Anhalt, 75% of our annual budget expenditure is related to reaching the UN Sustainable Goals. That means issuing a labelled green or social bond would not make much difference for us.

Q&A with Edgar Kresin, Treasurer, State of Saxony-Anhalt

Lischke, Investitionsbank Berlin: We did consider issuing Covid bonds and had talks with DCM teams about it, but ultimately we decided to concentrate our efforts on dealing with the big increase in workload from the financial support programmes provided by the German government and the State of Berlin in the form of grants and loans. 

About 40% of our staff was reassigned from other programmes to deal with Covid-related measures. We felt the focus should really be on the payout side, checking and processing the various response programmes. Issuing a Covid-labelled bond would have been nice but we decided to issue normal, standard bonds in the end.

GlobalCapital: While we are on the subject of ESG finance, what are the other new or recent developments in this space? For example, we recently saw Stockholm issue a health impact bond. Might that be of interest to some of the borrowers in this discussion?

Luithlen, DZ Bank: Yes, there is a lot of innovation going on in the ESG space, along three dimensions, really. There’s a product dimension, a documentary methodology dimension and then an overarching trend of creating a cohesive and holistic market.

On the product side you have, of course, transition bonds, which everybody is talking about; you have people looking at biodiversity bonds; and you have blue or water bonds transferring from the official sector into the private sector. 

I personally think that CO2 certificates as a means to collateralise, in a loose sense, a bond transaction is quite interesting. That also opens the question of what the Covid crisis does to the price of carbon, measured in CO2 certificates. If the price of carbon goes down, then of course, we’ll find it harder to restructure the economy in a more carbon-neutral way. That’s a topic that currently is quite overlooked.

On the documentation side, we have ESG-linked and Use of Proceeds structures. Use of Proceeds is prevalent in the bond market; ESG-linked in the Schuldschein market. We are beginning to see a bit of crossover between the two.

The final point is that the pain of transparency and having to explain sustainability strategies, which was very much lying with issuers, is now beginning to shift.

Currently, we have a move by issuers to also want to understand better what funds they use. To optimise the utility in the sustainability dimension of the flow of funds, it makes sense to prefer sustainable investors when you allocate bonds. That’s something we facilitate with our service “ESGlocate”.

We are also seeing dealers beginning to be selected based on their sustainability metrics — a move that the IFC is spearheading, with others looking into it. Issuers want to work with dealers who have a strong sustainability footprint, so we are starting to provide data to issuers around our own sustainability as a dealer. That all plays into creating a cohesive and holistic sustainable financial market.

GlobalCapital: What do our issuers think about IFC’s move?

Weyhausen-Brinkmann, KfW: We implemented the ESG rating from banks as one criteria among others for the selection for green bond underwriters in 2016. Interestingly, this led to a couple of initial discussions with DCM bankers, who said “well, we are a bank and we cannot really influence the ESG score”. But as time has moved on, DCM teams have realised that an ESG score has an impact on their future business opportunities with ourselves. 

Now we feel that many banks — actually almost all of them — are pushing quite hard for a positive ESG score, and are providing us information about the progress they are making. It’s just a small example, but it does underscore how the relevance of ESG in fixed income has grown in importance lately. We definitely welcome the approach by IFC — it’s a very good one.

Goebel, Rentenbank: Certainly we expect banks we work with and mandate on transactions to have a clear and deep experience in the market they operate in. So a bank mandated by us for a green bond — we are in fact going to issue a green benchmark later on this year — would certainly have to have expertise and a proven track record in this field.

That is not only limited to knowing investors who are going to buy those bonds, but also includes being market leaders in promoting those markets. And ideally also being recognised leaders with respect to green activities in their own right. 

However, we would not make a mandate for lead managing a green bond contingent on being particularly green, for example, for their office buildings. That would just be a bit too much from my perspective.

Q&A with Stefan Goebel, Managing Director, Treasurer, Rentenbank

Berisha, NRW.Bank: I think things will change in the future. While we don’t yet have clear metrics where we measure the ability of banks to support us in our green bond activities, I can see us having them in the future. It makes a lot of sense across the green and social markets.

Kresin, Saxony-Anhalt: I believe that we also need banks to have a transformation process or to finance transformation from, let’s say, dirty industry to clean industry. And not only measurements of what is already clean. We need finance for the transformation process and so far, I don’t know any measurement of how to do that. It’s quite tough for a bank to find management tools for that. But we always should consider that we also need banks to come from dirty to clean, and not only have clean banks doing only green projects.

GlobalCapital: I want to ask you about how investor bases have evolved since the beginning of this crisis. Alex — you issued bonds quite early. What was the make-up of your book? Was it different from previous years? And do you expect it to change?

Labermeier, Hesse: If you offer bonds with negative yields up to 10 years — as we have already seen in all recent years — it’s harder to attract real money investors, as they are looking for higher yields for sure, although they have been present in our bonds. 

In recent years large portions of our bonds were taken up by bank treasuries, smaller amounts by insurance companies. This was the set-up before the pandemic. 

Now we are in the pandemic situation we have continued to see large order books from banks. I think they wanted to show support during this time. Nevertheless, we have continued to see support from real money and central banks — one third of our deal went to real money accounts. So the investor base hasn’t changed that much.

Lischke, Investitionsbank Berlin: We did one issue at the height of the crisis, a two year floater tap at the end of March. Our established investor base came back and supported the deal with large orders. But the higher spread also drew some new investors that we have not seen before. For example, we saw some new treasury investors from Italy and Scandinavia for the first time. But overall, the grand majority were the well-known investors that we have had in the past and that we have relied on.

GlobalCapital: Do you expect those Italian bank investors to carry on investing in you, or was it just a temporary phenomenon, given where spreads were then?

Lischke, Investitionsbank Berlin: Because of the comparatively attractive credit curve at that time, I do not expect them to automatically return on tighter spreads. But we did appreciate seeing that there were lines open.

Weyhausen-Brinkmann, KfW: From early April SSA markets have provided some great opportunities for investors. We had been issuing with single digit spreads over US Treasuries at the beginning of the year already, and spreads then got much wider. So we saw a lot of investors coming back who were just seeing SSAs as too expensive.

On top of that, the buying programme of the ECB is dominating SSA markets. We have seen books of some sovereign deals almost reaching €100bn, which is quite remarkable. The ECB has created some great opportunities for investors and inspired great confidence. But we have probably already seen a lot of the rally, from early April until now, and we will move into a spread range, or a yield range, that will not perform as strongly. I think order books will adjust to levels we have seen before.

Goebel, Rentenbank: We have largely seen the usual mix of investors, with banks’ liquidity coverage ratio portfolios dominating purchases, accounting for roughly 50% overall, and central banks and official institutions accounting for another 35%. 

There was one difference I found interesting — we have seen some central bank portfolios from eastern Europe buying our euro debt, and it appears to me that they just particularly liked the relatively wide spreads versus Bunds.

GlobalCapital: Do you see those central banks as tourists, if you like, or do you think they might stick around?

Goebel, Rentenbank: I’m not sure I particularly like the term “tourist”. Buying when you get a particularly attractive spread over Bunds is pretty smart to me. So if they were taking an opportunity I would say "well done" because spreads are tightening overall, and certainly tightening versus Bunds, once again. So if that was tourism, then it was smart tourism.

Luithlen, DZ Bank: Otto expects a bit more range trading and consolidation in spreads and that is what’s beginning to happen. Whether you look on the Länder side, the covered side or the general rates universe, order books are less oversubscribed. The element of speculative money that was chasing the Pepp bid is less enthusiastic now. Some real money investors are already finding the spreads expensive. 

It is not straightforward to discern whether that’s due to the tightening move, or to a resurgence of infection clusters. That is also, of course, a driver. But we are definitely now more in a normalisation phase.

Q&A with Friedrich Luithlen, Head of Debt Capital Markets, Managing Director, DZ BANK

GlobalCapital: What are the prospects for the next six months? Do you expect similarly good conditions to issue into? Will they get harder? And what are you doing to prepare?

Goebel, Rentenbank: Credit spreads in euros are continuing to tighten. If I look at the levels of, for example, the European Investment Bank’s bonds, the German names still have some way to go. 

The fact that the EIB has tightened so much is simply because the Public Sector Purchase Programme and Pepp can buy up to 50% of their bonds and are certainly very active in the most liquid names. But at some point, they will be done even at the 50% level and then they will probably have to look elsewhere. 

So if that is the benchmark, spreads in euros can tighten for another 10bp-15bp, depending on the individual names. Hence, I think nobody needs to be in a hurry. As I understand it, a lot of the borrowers aren’t in a hurry right now because they have pre-funded. In terms of supply and demand dynamics, that’s positive for all of us. 

We have raised €7bn out of €11bn and we will not exceed our communicated borrowing needs. So we can be reasonably relaxed about the next couple of months.

In addition, after a drought of almost a year, US dollar funding is cost-effective again, and we have also seen opportunities in a number of other currencies. So right now things seem to be on the bright side from a funding perspective. But those times are something that can never be taken for granted.

Weyhausen-Brinkmann, KfW: I agree with Stefan about issuance conditions. But I think we need to mention a new issuer coming to market — in fact it is an well‑established issuer but potentially coming to market in huge size — which is the European Union. They have to refinance the large SURE-Programme and potentially the much larger EU-Recovery Fund.

So there will be a lot more supply in the euro SSA community. As a result, we believe that the non‑euro markets will grow in importance for issuers like ourselves, in terms of diversification. This will probably play out in the second half of this year, but also beyond. 

We have had a lot of dollar redemptions recently but we have not issued so much in dollars this year. This will change over the second half of the year with more US dollar issuance from KfW. 

GlobalCapital: Is non-euro issuance an option for other issuers — or could it send the wrong message?

Lischke, Investitionsbank Berlin: We are a smaller issuer, with our €2.5bn that we issue every year. As such, we are very focused on keeping our curve alive and keeping a steady supply. We will continue to focus on euros and issuing in Europe. So we would not change there, but I can very much understand that for a larger issuer like KfW diversifying into dollars is much more important.

Kresin, Saxony-Anhalt: We always have the ability to issue in other currencies but in March and April they were rather expensive, so did not make sense for us. Things change, though, and we will always consider alternatives to euros — whether dollars, pounds or others.

Berisha, NRW.Bank: For us, as a mid-sized issuer, currencies other than euros are important, and we use them frequently to diversify our funding and investor base. 

But like Edgar said, March wasn’t the right time to go to the dollar market, for example, because it was just too expensive. The cross-currency basis swap was not executable, at least not in a good manner. 

But conditions improved in mid-April or May and this was the window when we decided to go out with a five year dollar benchmark. It went really well, as I think other issuers found when doing their own dollar trades.

As for the second half of the year, we think the market in general — whether in euros or other currencies — will be there. But we will be watchful because we mustn’t get complacent. Conditions seem to be very good at the moment — there’s plenty of liquidity and spreads have tightened sharply. But what if we see a second wave of coronavirus cases? Sentiment isn’t shifting yet but I sense people are watching the situation very closely.

Luithlen, DZ Bank: Thanks to the official support mechanisms such as the ECB’s QE programmes, we have seen a general shift by issuers to doing more benchmarks. Against this background, how are the private placement and arbitrage funding markets holding up?

Kresin, Saxony-Anhalt: There is a shift to more benchmark bonds for all German states. But you also have to consider another point: the future of Euribor. Normally when you are doing a private placement you swap yourself back to Euribor. With Euribor due to be replaced, this makes doing private placements hard for us. 

We are seeing opportunities with investors asking us for private placements, sometimes structured in other currencies — there is demand, but we are not able to hit it because we don’t like Euribor as an interest rate.

Labermeier, Hesse: We expect to do more benchmarks this year. We still have €3bn-€4bn to do up to the end of the year — so around a third of our funding requirement. We feel very comfortable with our liquidity position, but there are still a lot of uncertainties out there for the rest of the year, including the impact of a potential second wave. 

Doing larger benchmarks does take some of the risk out of issuance. While we have the large bond buying programmes in place that will continue to be very supportive, there will be difficult days. So rather than having to be in the market every day, doing smaller amounts, a strategy of doing benchmarks is the sensible option.

Kresin, State of Saxony-Anhalt: One thing to add that we have seen — not in Saxony-Anhalt but elsewhere — is the huge increase in very long-term private placements, 60, 70 years, some even 100 years, due in part to the low interest rates.

GlobalCapital: Stefan, can you tell us a bit more about your green bond plans?

Goebel, Rentenbank: This has been in the works for quite a while now. It’s a very cumbersome process to get all the things together and we are doing it mainly through the resources of our funding team. 

But we are quite well advanced — our Green Bond framework is finalised, we have heard back from our second party opinion provider and the impact reporting is in its final stages, so we will have the documentary set-up finalised very soon. We are also a member of the ICMA Green Bond Principles.

We hope to be able to get the transaction done either late in the third quarter or at the beginning of the fourth quarter. It’s still to be determined whether it is going to be a transaction launched from within our official benchmark programme — ie, a minimum €1bn deal — or if we go for a smaller size. However, it is definitely going to be a broadly syndicated public transaction.

GlobalCapital: We talked earlier about how well markets have coped with working remotely — borrowers have been able to issue in vast size without many problems, once the sharp volatility of mid-March had subsided. Transaction-wise, markets have more than coped — they have excelled. But how you are going to approach investor relations if you can’t travel as much?

Labermeier, Hesse: We are not a particularly large issuer, usually around €6bn a year, although this year a bit more. So we don’t usually do lots of conferences or large investor relations trips. Plus, the story of the German Länder is quite clear. 

We’ll do what we usually do, which is a series of factsheets in different languages, although perhaps this year we will also do some one-on-one calls over a video conference platform such as Skype. I have to say, though, that people are getting used to this. They like the fact it can save time — you can do a face-to-face meeting in 30 minutes and get more work done in the day.

Weyhausen-Brinkmann, KfW: The crisis has shown just what is possible. Let’s take today’s roundtable — I don’t think any of us would have thought about doing an event like this even six months ago but it’s working very efficiently and nicely. So as much as I enjoyed coming to London for a roundtable, honestly, it’s much more convenient having it here now for one hour and then returning to work over the course of the afternoon instead of waiting at the airport. 

The use of technology has improved quite significa

ntly. We are using more video conferences, in particular with banks and for discussions like these, and they will no doubt also improve going forward. Given the developments over the last couple of month, we had many bilateral investor calls to answer their questions, and I am sure this will continue. In addition we are thinking about new formats. For instance, hosting a webinar where we can bring in many more people from KfW than would be possible on a business trip, such as our economists or other people from the treasury department, who might able to give a much broader picture. 

Goebel, Rentenbank: I absolutely agree that we are going to see a lot of changes and additional ways to communicate with investors and our partner banks. 

There’s one caveat, however. I’ve experienced a number of situations over the past couple of weeks when we’ve got things done because of past personal contact. Right now, we are picking the fruit from past personal activities. 

We should not under-appreciate the value of personal interaction. While technology can enable us to more things — and indeed, we might even be able to do more investor relations as a result and meet more investors via platforms and other forms of remote contact — I think personal contact, being in front of investors physically, is not going to go away and it shouldn’t.

Lischke, Investitionsbank Berlin: We think roadshows and personal contact are especially important to keep the investor base alive. We had a roadshow planned for Scandinavia with DZ Bank which we had to postpone as a result of the pandemic. So we prepared everything on Webex, creating a digital roadshow. But the feedback we got for this first impression was that most investors would very much like us still to come later when personal travel is possible again. 

So follow-ups are very much possible over the internet and in some cases, perhaps where you have only one investor in a distant location, this might be an important tool in the future. But when you have the possibility to meet many investors in one place, the personal contact brings so much more benefit that this will stay important.

Q&A with Johannes Lischke, Director, Money and Capital Markets, Investitionsbank Berlin

Berisha, NRW.Bank: As of now, the digital way of meeting people seems to be the perfect one. But as Stefan said, we are still enjoying the fruits of the past. 

The future will bring a mixture of IR methods. We will use these new techniques, which are really good and time-saving for all of us — I’m pretty sure we will all be travelling less — but we need to get out there, see investors, see each other and maintain the personal contacts we have, because that’s the one part digitalisation cannot bring.

Here at NRW.Bank we have built a digital meeting room for roadshows, panel discussions, etc. I think that’s the way for the future, but it’s just one part of it. We need to find the right mix, which I’m sure we will, given time. 

Luithlen, DZ Bank: Johannes mentioned the Scandinavian roadshow we were supposed to be doing. This really highlights the importance of doing face-to-face physical meetings when meeting people for the first time. It also shows us that there is going to be an added dimension when advising issuers on actualising their investor work. We will need to decide who we need to meet in person and who we can speak to over video conference. 

We’ve actually had some good experiences meeting the German investor base, which is fairly well dispersed, geographically speaking. We did a group investor call for one of the German states recently which had over 200 participants from Germany. That’s very efficient, so hopefully a format that will stay with us.

Kresin, Saxony-Anhalt: Investor relations is always topic-driven. In 2000 to 2005 we needed to go out on the road to explain the credit of Germany and that we were doing well — at that time The Economist named Germany the ill man of Europe. That’s changed, of course. 

All of us have also to go to investors to explain German federalism at various stages. I believe the German SSA sector has done a very good job over the last 20 years to explain credit and federalism and also Germany. 

Right now the big topic is sustainable finance — green, blue and other types of ESG finance. But the next topic is how we are coping with the pandemic. 

Today it’s too early, but probably in a year’s time we’ll need to go out and tell our story and say what has changed. In which format I’m not quite sure though — digitally or physically!