Luxembourg continues to set benchmarks in sovereign finance. In September 2025, the Grand Duchy issued a €2.5 billion 10-year bond that drew more than €18 billion in demand, a record that underscores its enduring AAA reputation and appeal to global investors seeking stability in a volatile market.
On 10 September 2025, Luxembourg issued a €2.5 billion 10-year bond maturing in August 2035, a loan that will be listed on the Luxembourg Stock Exchange.
The transaction price was set at a terminal spread of +26.8 basis points against the benchmark Bund (the standard reference for eurozone sovereign debt) at 2.600%, which equates to a final yield of 2.935% and a reoffer price of 99.700%.
The transaction was jointly managed by a group of major European banks, including Crédit Agricole CIB and Deutsche Bank.
Largest single-tranche orderbook
The subscription book opened at 9am. Investors had 3 hours to respond to the offer. At 12am the final demand exceeded €18 billion, representing “the largest single-tranche orderbook ever achieved by the Grand Duchy of Luxembourg,” Luxembourg’s State Treasury said.
“No new issue concession in the end and a final book of €18 billion is a strong statement of market participants’ confidence in the strength of Luxembourg’s credit and economy,” commented Emmanuelle Trochu (Global Head of Official Institutions Coverage) and Benjamin Moulle (Head of DCM SSA) both of Crédit Agricole CIB, one of the joint lead managers for the transaction.
The issue attracted 230 investors, mainly bank treasuries (40%), asset managers (25%) and insurance and pension funds (18%), with participation from across Europe. France, the UK and Ireland led the allocations, reaffirming Luxembourg’s standing as a safe-haven credit within the euro area.
“Luxembourg therefore benefits from a very large customer base, investors who are particularly attentive to the quality of the issuer but also to the liquidity of the stock,” Trochu and Moulle added. “These investors of great quality often operate a ‘buy and hold’ strategy, meaning that they plan to hold these bonds for a long period of time.”
A safe-haven asset
The investors hailed from France (17%), UK/Ireland (16%), Luxembourg (14%), Belgium/Netherlands (11%), Nordics (10%), Switzerland (8%), Germany/Austria (9%), Iberia (9%), Italy (3%) and other countries (3%).
Luxembourg’s continued ability to attract a diversified investor base underscores its position as one of the few remaining AAA-rated sovereigns. Regular, liquid issuance and disciplined fiscal management have allowed it to maintain that rare status while avoiding new-issue premiums.
“Luxembourg is one of the only sovereign issuers to offer the famous ‘AAA‘ rating from the three main rating agencies”
“Luxembourg is one of the only sovereign issuers to offer the famous ‘AAA’ rating from the three main rating agencies. The regular fundraising and liquid bonds offered by Luxembourg are also reassuring elements for a large number of investors as to their ability to trade on the secondary market,” Trochu and Moulle explained. “A consensual choice of maturity also helps to create this perception. This allowed Luxembourg to avoid paying an issue premium while raising €2.5 billion in a single operation for the second time since 2021.”
15 institutional bonds since 2013
The proceeds are for general fiscal purposes, intended to strengthen Luxembourg’s fiscal liquidity without compromising its fiscal sustainability. The State Treasury added that the loan “will not serve to finance infrastructure or sustainability projects. And it will have no direct impacts for companies and individuals.” Following the issuance of the bond, the public debt will amount to around €24.4 billion, or 27.2% of GDP.
Since 2013, Luxembourg has issued around fifteen institutional bonds and loans, from €300 million to €2.5 billion at rates ranging from 0.00% to 3.25%, with maturities of 7 to 30 years. All are listed on the Luxembourg Stock Exchange. The total outstanding medium and long-term debt managed by the State Treasury is €20.259 billion.
An innovative borrower
Luxembourg’s innovation in debt markets extends beyond conventional issuance. In 2020, it became the first AAA-rated country to issue a sustainable sovereign bond, a €1.5 billion instrument financing 65 environmental and social projects. Earlier, in 2014, it was the first eurozone country to issue a sovereign Sukuk, an Islamic-compliant bond, signalling openness to alternative capital structures.
The Sukuk issued was of the “Al-Ijarah” type, a bond backed by tangible assets, which included three buildings owned by Luxembourg Treasury Securities SA, a Luxembourg company 100% owned by the Luxembourg State. Aligning with Islamic finance principles, the investor does not receive interest but is remunerated through the rents received for the underlying buildings. In this case, the investors were remunerated at a rate of 0.436% per annum. At the end of the transaction, in 2019, investors were able to recover their initial investment as in the case of a conventional bond.
An innovative investor
Luxembourg is also pioneering on the investment side. The Intergenerational Sovereign Fund (FSIL) recently allocated 1% of its €745 million portfolio to Bitcoin exchange-traded products, following a policy shift that allows up to 15% exposure to alternative assets. The move cements Luxembourg’s role as Europe’s leading hub for regulated alternative finance.
The Luxembourg Intergenerational Sovereign Wealth Fund (FSIL) was set up in 2014 as a public institution, with the aim of saving money whose income can be used to contribute to the well-being of future generations. The fund is financed by part of the income from e-commerce VAT and by VAT and excise duties on fuel. The money is invested in stocks, bonds and exchange-traded funds (ETFs).
“Luxembourg confirms its role as a pioneer in driving financial innovation and Europe’s dominant hub for alternative funds”
“Luxembourg confirms its role as a pioneer in driving financial innovation and Europe’s dominant hub for alternative funds,” said Luxembourg for Finance, the financial centre development agency, adding: “By becoming the first eurozone government to invest part of its reserves in Bitcoin, Luxembourg once again demonstrates its commitment to support emerging and future-oriented investment trends.”
As global markets face tighter monetary conditions and rising investor scrutiny, Luxembourg’s blend of fiscal prudence and innovation continues to offer a model for sustainable sovereign finance in the 21st century.
This article was published in the 8th edition of Forbes Luxembourg.
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