There are currently attractive entry opportunities, which makes this a cost-efficient tool to drive transition. Traditional negative basis trades are used not to express a directional view on a credit but to take advantage of bond technicalities.
Similarly in the context of a green bond, an investor can buy “the green bit” of a company they do not like from a fundamental standpoint without exposing themselves to the credit per se.
We illustrate the concept by looking at the recent GM green bonds issued with a significant negative basis, meaning that the bonds have a wider spread than the equivalent CDS.
