Successful Eurobond Issuance

Today the Republic of Iceland issued a new €500 million 5 year benchmark bond, equivalent to ISK 72bn. The transaction was issued at a spread of 34-basis points to the Euro 5-year mid-swap rate. The proceeds will be used to strengthen the Central Bank of Iceland’s international reserves and refinance the outstanding Eurobond maturing in June. The issue reflects the new strategy of the Government’s Medium-Term Debt Management Policy, which aims to issue annually in the international markets.

Investors showed strong interest, with demand exceeding EUR 6bn, more than twelve times the issue size. The granular investor participation comprised asset/fund managers, bank treasuries, central banks, official institutions, insurance companies, and other institutional investors, mainly from Europe. BNP Paribas, Deutsche Bank, JP Morgan and Nomura acted as joint lead managers.

“Investors’ keen interest in the bond indicates the Republic of Iceland’s ready access to the international capital markets and represents an acknowledgement and support for the new debt management strategy, that aims to enhance the predictability and regularity of issuance and, all else being equal, should lead to a positive impact on Iceland’s financing terms. It is also gratifying to see an even more diversified investor group,” says Minister of Finance and Economic Affairs Daði Már Kristófersson. 

Treasury issues are priced according to the mid-swap rate, and the terms in this syndication are considerably better than in previous ones. The premium to the mid-swap rate was 34 basis points, as compared with 42 bp in the May 2025 issue. The spread on Treasury issues has continued to tighten over recent issues, in spite of geopolitical challenges and macro uncertainty, but has held broadly steady year-to-date. The bond bears fixed coupon of 3.25% interest and is issued for five years at a yield of 3.352%.

“Despite turmoil and uncertainty in international markets, the spread on the Treasury has remained fairly stable. Iceland’s economy and public finances are sound in spite of challenges. The country is well positioned in comparison with the headwinds facing many other countries: the GDP growth outlook is favorable, the public debt ratio is declining, and the export sector has grown more diversified, which is reflected in a stronger credit rating,” says Daði Már Kristófersson.