The first homology designed to finance Europe’s defense spending is offered by a French bank today Thursday (28.8.2025), with the aim of taking advantage of investors’ strong interest in its sector defense.
French BPCE sells a bond of at least 500 million euros ($ 582 million), according to Euronext NV’s new methodology for a “European Defense Bond”, according to sources cited by Bloomberg. Its form is similar to green bonds, in the fact that revenue is separated, except that in this case cash They will fund military companies instead of environmental friendly projects.
This historical product demonstrates a radical change in the attitude towards the funding of the industry by Russia’s invasion of Ukraine in 2022. Defense companies are now one of the most popular in European markets, as manufacturers seek to satisfy the additional billions of euros. Even some viable mutual funds that had once put the industry in the black list, are now involved in the effort.
“The commitment to the use of revenue reflects the enormous work that Europe has to do,” said Maureen Schuller, head of the financial sector strategy in ING Groep NV. “I believe that in the future we will see more such issues, with banks intervening to support Europe’s defense ambitions.”
Initial price estimates show a level of about 105 to 110 base points above the mid-swaps for the five-year bond, according to sources.
With the war raging near their borders and US President Donald Trump threatening to withdraw its support, European Union leaders are struggling to develop a military deterrent to Russia. In June, NATO members agreed to increase defense spending to 5% of the gross domestic product, after Trump’s repeated criticism of its European allies on inadequate security expenditure.
Asset Managers and Banks compete to benefit from increasing spending. This led to rise of defense companies’ shareswhich occupy four of the top five places in the Euro Stoxx 600 reference index this year. Even companies that have only indirect relationships with defense attract a number of candidate lenders.
The BPCE bond is the last attempt to use this frenzy. The bank has already increased its funding to the defense industry by two or a half times, and the funding of exports of French defense products by more than seven times, according to a presentation to investors.
However, the sale comes in a hectic period for French debt due to political uncertainty. The cost of lending to the country has increased compared to its counterparts Since Prime Minister François Bairou announced that he will seek a vote of confidence next month. Nervousness also has expands spreads of French banking bonds.