Capital markets News

City of St Gallen to issue CHF 100 million digital bond on SDX

City of St. Gallen

The Swiss City of Saint Gallen will use the SIX Digital Exchange (SDX) to issue a CHF 100 million, three year digital bond. This is the fourth municipality to issue a digital bond on SDX in the last three months. It coincides with wholesale central bank digital currency (CBDC) trials conducted by SDX, where the wholesale CBDC issued by the Swiss National Bank is used to settle the bond issuances.

The Canton of Zurich (CHF 100 million) and City of Basel (CHF 105 million) issued bonds in November and Lugano issued a second CHF 100 million bond earlier this month. All were settled with the CBDC.

Basler Kantonalbank, UBS and J. Safra Sarasin are the lead managers for the St Gallen issuance. 

To date, all the bonds listed on SDX have been denominated in Swiss Francs and are issued under Swiss law. However, last year FINMA gave the green light for bonds denominated in euros, including settlement using tokenized euros. With a wholesale CBDC Swiss Franc or tokenized euros, SDX enables atomic settlement or delivery versus payment, removing counterparty risks.

Last September SDX announced plans to list tokenized foreign bonds. In other words, conventional bonds which are issued elsewhere. Earlier this week SDX published a rule change allowing the listing of bonds under foreign law. The certificates for the underlying conventional bonds must be held in a recognized depository.

So far, most of the issuances on SDX have been for large institutions, such as SIX, UBS and the four municipalities. Now SDX is gunning for smaller firms with at least CHF 25 million in equity and looking to issue a bond of over CHF 20 million.

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