Like conventional Federal securities, green Federal securities are traded on the stock exchange after they are issued. They are therefore also subject to price risk and may gain or lose value during their term. In most cases, changes in the level of yields on the bond market generally influence the price of Federal securities. Since green Federal securities are very similar to conventional twins due to the twin concept, their price reacts very similarly to that of their twin.
Like their conventional twins, the classic Federal securities with the same maturity, green Federal securities are subject to price risks. They can be used to generate price gains, but also losses. In a positive interest rate environment, they generally offer a fixed annual interest payment - the coupon.
Even after purchase, changes in the yield on the market generally ensure that their market price fluctuates daily during the term. This is particularly relevant if the Bunds are to be sold before they mature. Investors who correctly assess the future development of yields on the bond market thus have opportunities for price gains, but on the other hand, price losses can also occur.
The following rule generally applies:
If the market yield rises, the share price falls - if the market yield falls, the share price rises.
|Bond market yield development||Price development Green Federal securities||Explanatory note|
|↓||As market returns rise, prices fall.|
|→||→||If the market return is constant, the prices remain unchanged.|
|↓||↑||When market returns fall, prices rise.|
The extent of the price reaction depends on the bond's features: The longer the remaining term to maturity and the lower the coupon of the green Federal security, the more strongly its stock price usually reacts to changes in bond market yields. Thus, a 30-year green Federal bond is likely to fluctuate in price more than a 5-year green Federal bond, and a security with a 1 % coupon more than one with a 2 % annual interest payment.
Regardless of price movements, green Federal securities generally offer regular interest income to all investors.
The capital market has developed a comparatively higher price for green Federal securities compared to their conventional (without green coverage) twins. Their yield is lower. Buyers of green Federal securities thus forgo a small portion of their return in favor of allocating their investment funds to investments in environmental and climate protection.
This difference in return is called "Greenium". It can be seen as the value of a green investment compared to an ordinary investment. Thanks to the twin concept, it can be transparently read off directly for the first time as the difference in yield between the two twin bonds.