At the end of August, KfW – one of the busiest issuers in the international bond markets with a 2024 funding programme of €80 billion – issued an unusually small and short-dated bond to just three investors.
It would be easy to miss the €50 million deal, paying a coupon of 3.46% and maturing on November 28, 2024, that sole bookrunner DZ Bank sold to DekaBank, DZ Bank itself and Union Investment, part of the DZ bank group.
However, it could be one of the most important deals KfW issues this year.
That is because it is a digital bond in the form of a crypto security as defined by the German Electronic Securities Act (eWpG). Not only that, but it also settled with cash on chain in the form of central bank digital currency (CBDC), using the Deutsche Bundesbank’s Trigger Solution as part of the European Central Bank’s test phase for use of central bank money in wholesale markets.
It follows a similarly short-dated €30 million digital bond from the Republic of Slovenia, marketed at the end of July by sole bookrunner BNP Paribas as the first digital bond from an EU sovereign.
