After announcing plans to issue an inaugural digital bond earlier this month, Luxembourg’s Treasury priced a €1.7 billion ($1.91bn) issuance on October 14. The 10 year benchmark bond offers a coupon of 3.7% with orders exceeding €3.1bn, including €150m from the lead managers. The main reason for capping the issuance at €1.7 billion was to match a maturing November bond.
This is the world’s second largest digital bond issuance after Hong Kong issued a €2.55 billion green bond in four tranches last month. And it will help Europe to start catching up to Asia’s substantial lead in digital bonds, largely driven by massive issuances by the Hong Kong SAR and other state-linked entities such as the Hong Kong Mortgage Corporation. It is also only the second European sovereign digital bond after Slovenia issued a €30 million bond in 2024. The EIB has issued several digital bonds, but Luxembourg’s is the first benchmark-sized issuance from a European sovereign.
Securities are issued on chain but represented off chain for primary and secondary market settlement as well as asset servicing through conventional rails. This interoperability approach means minimal disruption for investors. Most other CSDs involved in bond issuances offer interoperability with conventional systems to reduce adoption friction. The issuance platform was Deutsche Börse’s D7, a private permissioned EVM-compatible blockchain based on Besu, and was issued via LuxCSD, making the bond eligible as ECB collateral.
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