Bpifrance raises €1bn at 2.75% as institutional investors back a new labelled route for defence financing
France’s state investment bank Bpifrance has raised €1bn through a labelled defence bond, with the five-year issue attracting €3.8bn in orders from 98 institutional investors — nearly four times the amount sought.
The senior unsecured bond priced at a yield of approximately 2.75 per cent. Two-thirds of investors came from outside France, with Nordic institutions accounting for 22 per cent of demand, Southern Europe 20 per cent, and further participation from Benelux, German-speaking countries and the UK.
Proceeds will finance loans to European defence companies, with particular focus on SMEs and mid-caps, as well as export credit facilities for European defence equipment sales to allied nations. The bond carries the European Defence Bond Label, an industry-backed certification introduced by Euronext in July to channel private capital toward defence and security investments.
The label framework, developed by Euronext with industry stakeholders, establishes criteria for eligible defence activities — often compared by market participants to green bond standards, but applied to military and dual-use sectors. Bpifrance’s structure excludes controversial weapons and ensures traceability of fund deployment, addressing ESG concerns that have historically deterred institutional investors from defence exposure.
The Bpifrance deal is the first bond issued under Euronext’s formal labelling framework, though Groupe BPCE raised €750m through an unlabelled defence bond in August that attracted €2.8bn in orders. Both issuances suggest institutional appetite for defence-linked debt when structured with transparency.
Asset managers accounted for 61 per cent of demand for the Bpifrance bond, with banks taking 22 per cent and central banks or official institutions 9 per cent — indicating broad institutional participation. The reception suggests defence bonds could begin to function as a distinct segment of the fixed-income market, alongside green or sustainability-linked instruments.
The bond’s success opens financing channels beyond traditional routes such as sovereign borrowing, EU-backed loan facilities like SAFE, and direct government procurement budgets. While governments negotiate loan programmes and grant allocations, capital markets can provide immediate, scalable funding for defence supply chains.
Bpifrance also launched a €450m fund for defence startups in November with a €500,000 minimum investment threshold, positioning France as a leader in mobilising private capital for defence capacity. The combination of bond issuance and venture funding highlights Paris’s strategy of using state-backed institutions to catalyse broader private-sector participation.
Whether defence bonds become a significant funding source will depend on sustained investor demand and issuer pipeline. Bpifrance and BPCE have demonstrated proof of concept, but the asset class remains nascent as European defence companies and public agencies assess how capital markets can supplement government procurement and EU-level financing.
Read here our explainer on defence bonds.