KfW raises its funding needs for 2017 to EUR 75-80 billion

• Benchmark bonds remain the flagship of long-term funding: some EUR 39 billion already raised
• ‘Green Bonds – Made by KfW’ convince investors around the world
• Despite Brexit: strong demand for bonds in British pounds

KfW raised EUR 51.6 billion in the international capital markets in the first half of 2017. ‘Political uncertainties have kept us all busy at the start of the year and suggested very volatile market conditions. Against this backdrop, the high funding volume so far is remarkable. We have been consistently present in the market at the right time with the right offer for investors, and this paid off’, said Dr Günther Bräunig, member of the KfW Executive Board in charge of capital markets.

In response to KfW’s updated forecast of new lending business for the year, Germany’s large promotional bank has just raised the target corridor of its funding needs for 2017 to EUR 75-80 billion from 75 billion. Overall promotional business amounted to EUR 18.2 billion in the first quarter of 2017 already, an increase of 16% year-on-year. The growth in new lending is being fuelled by the positive business cycle in Germany. Private consumption and residential construction expenditure are set to continue growing steadily –with slightly less momentum. Export demand is also picking up and, combined with very high industrial capacity utilisation and borrowing terms that are still at historically low levels, is providing a tailwind for business investment.

Euro clearly in the lead again in first half-year

The share of funding in euros was up year-on-year in the first half. Of the EUR 51.6 billion raised, EUR 28.6 billion – 55% – was in the home currency (first half of 2016: EUR 16.5 billion, or 39%), of which EUR 22.5 billion was in the form of benchmark bonds (including increases). The higher euro share in funding was mainly due to the yield increase and upcoming inflation expectations. The asset purchase programme of the ECB/Eurosystem is also supportive and helping to make KfW’s Eurobonds more attractive.

Just as last year, demand for US dollar bonds was primarily in the short to medium-term segment, with benchmark and global bonds placed in a total volume equivalent to EUR 18.5 billion.

KfW Benchmark Programmes in euros and US dollars take a share of more than 75% of total funding and remain the most important pillar of the bank’s funding activities. Investors continue to set great store in large-volume and, in particular, highly liquid bonds of the type KfW regularly issues.

Irrespective of the Brexit decision, funding in pounds sterling reached the equivalent of EUR 2.4 billion (2016: EUR 2.9 billion), which was again a relatively high share.

‘Green Bonds – Made by KfW’ for investors around the world

KfW issued bonds in a total of EUR 2.3 billion in pounds sterling and euros under its Green Bonds Programme in the first half. The Green Bond in euros deserves particular attention. It was issued in a volume of EUR 2 billion in response to very high international demand. That makes it the largest ‘Green Bond - Made by KfW’. Further activities are planned in the course of the year in this segment as well.

KfW expects less market volatility for the second half of 2017. Funding is expected to continue in the currency mix of euros and foreign currencies of the first half of 2017.

Facts and figures on KfW’s funding activities