UK launches new green gilt after bond market tumult

LONDON, March 10 (Reuters) - Britain sold 6.25 billion pounds ($8.41 billion) of a new green ​government ‌bond on Tuesday that took place against the backdrop of upheaval in financial markets triggered by ⁠the conflict in the Middle East.

Investor demand ⁠for the 4.625% March 2037 ​gilt was strong with 80.6 billion pounds of orders.

The Debt Management Office said the new 2037 gilt would pay a yield of 4.7167%, 10.75 basis points more than ​the 4.25% ‌March 2036 gilt used as a benchmark and at the tight end of initial price guidance.

"This transaction has been very well supported by a significant number of orders from a broad, diverse and high-quality set of investors – including from those ​who have not previously participated in primary gilt issuance," DMO Chief Executive Jessica Pulay said.

The ‌bond was promoted to retail investors by investment platform Hargreaves Lansdown, which said the sale was the first time that ‌retail investors had been able to buy a green gilt at launch. The yield on offer was close to that of the 1.75% September 2037 gilt.

Gilt prices rose ​in financial markets on Tuesday, recovering some of their heavy losses in recent days on worries ‌about higher inflation linked to the U.S.-Israeli war on Iran.

Britain started selling green bonds in 2021 to tap into investor demand for financing government environmental projects such as ⁠clean energy. ⁠Tuesday's sale was the single biggest of a green ‌gilt since the initial 10-billion-pound launch.

It was also the first sale via syndication for a green ​gilt since September 2022, ​when the wider gilt market was in turmoil following ‌former Prime Minister Liz Truss's announcement of her economic agenda.

Barclays, BNP Paribas, Citi, HSBC, J.P. Morgan and NatWest acted as joint bookrunners on the transaction. ($1 = 0.7432 pounds) (Reporting by Andy Bruce and David Milliken; Editing by William Schomberg)