The maturities of its SLBs also stand out. Limited general market issuance is of maturity greater than ten years, and longer dated bonds have the potential for greater materiality.
We review this new issuance, both in terms of the materiality of its structure, and its option pricing.
We welcome more use of SLBs by sovereigns, as they can be an effective tool to communicate longer-dated sustainability targets beyond the political cycle. The new structures offer enhanced materiality; the step-up coupons are higher and paid for longer.
We hope this sets a positive precedent for the market to follow. Model pricing suggests the targets are relatively achievable, which means the option price represents a low percentage of total spread.