Groupe BPCE, the French banking group that owns Natixis, has issued Europe’s first bond explicitly labelled for defence financing, raising €750 million via a five-year note.
The deal attracted strong demand, with orders of about €2.8 billion, according to market reports. Proceeds are earmarked to finance or refinance lending linked to defence and security equipment and technologies.
The transaction is the first to carry Euronext’s new European Defence Bond label, part of the exchange operator’s measures to ease market access for defence-sector borrowers. Euronext has said the initiative will prioritise admission to listing for such instruments and sits alongside plans for a dedicated growth hub and training programme for aerospace and defence issuers.
Structurally, the instrument mirrors the widely used “use-of-proceeds” format seen in green and social bonds: funds are ring-fenced and allocated to a defined category of activities, with reporting commitments to investors. In this case, BPCE has committed to subject the use of proceeds to independent external review and to publish annual allocation reporting. Euronext’s label itself does not mandate third-party verification, but issuers may opt for it to meet investor expectations on transparency.
Pricing references indicated a yield of around 3.167%, according to IFR, reflecting both the underlying rate environment and the spread for a new, labelled format in a sector that until recently saw limited access to dedicated capital-markets labels. Final documentation on the deal’s financial terms was not released at the time of writing, but the order book and allocation approach aligned with mainstream euro investment-grade issuance practice.
Euronext announced the European Defence Bond segment and label in spring–summer 2025 as part of a broader push to channel private capital into Europe’s defence-industrial base. The exchange has positioned the effort within a wider “Energy, Security and Geostrategy” pillar, alongside initiatives to support listings and to prepare defence companies for public markets. The objective, as stated by Euronext, is to accelerate financing for production scaling, innovation and supply-chain resilience.
The backdrop is a sustained increase in European defence spending commitments since Russia’s full-scale invasion of Ukraine in 2022, coupled with policy debates on how to mobilise long-term funding. Proposals at EU level include a larger multi-annual budget envelope for defence-related programmes in the next framework period, although these require unanimous backing from member states and approval by the European Parliament. Capital-markets instruments are therefore being examined as a complementary route to support industrial capacity.
Investor reception to BPCE’s debut suggests a ready market for clear, rules-based formats in the sector. Market data indicate the order book was several times covered, consistent with increasing participation by mainstream fixed-income investors in defence-linked credits. Coverage in financial media also noted the spread premium over risk-free rates as comparable with other labelled issues of similar maturity.
Use-of-proceeds frameworks in defence raise definitional questions that are less common in environmental finance. Euronext’s documentation describes the label as voluntary and market-driven, intended to classify bonds that finance European defence and security needs, while leaving room for issuers to define eligible categories within that scope. Issuers are expected to provide allocation transparency; third-party assessments remain optional unless required by the issuer’s framework. BPCE’s commitment to an external review and annual reporting is therefore notable in establishing a benchmark for subsequent deals.
For issuers, the label offers signalling value and potentially faster market access; for investors, it provides a common reference point in an area where screening policies vary widely. Whether the format translates into a sustained primary-market pipeline will depend on national procurement cycles, the pace of programme launches and the willingness of other financial institutions and prime contractors to publish comparable frameworks. Euronext has indicated that additional admissions are envisaged as part of its defence-financing platform.
In summary, the BPCE transaction establishes a template: a standard euro benchmark tenor; ring-fenced proceeds for defence and security technologies; and ongoing reporting supported by independent review. With policy discussions continuing on broader EU-level funding, the development of a labelled bond segment offers an immediate, market-based channel to support Europe’s defence-industrial objectives. The scale and reception of this first issue indicate that investor demand exists for clearly defined and transparently governed instruments in this category.
This article was first published on defencematters.eu
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