KfW diversifies funding as capital markets face COVID-19 challenge
German development bank KfW has diversified its sources of funding amid the coronavirus pandemic, with the lender also revising its funding in the international capital markets for 2020 from €75 billion to €65 billion.
After the European Central Bank's announcement of an increase of the existing Public Sector Purchase Programme, KfW was one of the first issuers to reopen the market at the end of March, issuing a Euro Benchmark Bond with a maturity of five years. Soon after, its three-year Euro Benchmark Bond recorded an order book of more than €15 billion.
In the first half of 2020, KfW was also active in the green bond market in a range of currencies. The bank issued green bonds with a total volume of some €435 million, including five new bonds and one tap denominated in Polish zloty, Hungarian forint, Norwegian kroner and Hong Kong dollars. With these KfW has expanded the range of currencies in its green bonds, thereby attracting new investors. KfW also continued its investment activities in its green bond portfolio, completing investments totalling €181 million in the first half of 2020. The portfolio volume currently amounts to approximately €1.7 billion.
KfW also participated in the targeted long-term refinancing of the Eurosystem through TLTRO III for the first time at the end of June 2020 with a volume of €13.4 billion.
The new Economic Stabilisation Fund (Wirtschaftsstabilisierungsfonds, WSF) set up by the German Federal Government also provides KfW with a further new source of funding. KfW can draw down funds made available from the Economic Stabilisation Fund for the KfW Special Programme 2020, which the bank is implementing on behalf of the Federal Government to support the German economy through the COVID-19 crisis, up to a maximum of €100 billion. The bank plans to draw down up to €30 billion from the Economic Stabilisation Fund for the first time in the third quarter of 2020.
