In support of European defence, against a backdrop where the security of the Old Continent’s supplies has become crucial in light of tensions with its long-standing American ally, a new financial instrument has been introduced: the ‘European Defence Bonds’, bonds intended to finance projects in the defence and security sector with the aim of strengthening the European Union’s strategic autonomy and resilience. These are debt securities issued by European entities (non-financial companies, sovereign, quasi-sovereign and supranational bodies, as well as financial institutions) to support specific programmes developed and implemented within Europe. The initiative was launched by Euronext, the leading pan-European stock and bond exchange.
Interest in this new instrument has grown in tandem with the commitment made by European countries to increase defence spending. This context has already fuelled a sharp rise in the sector’s share prices and is now set to attract bond investors as well.The structure of Defence Bonds mirrors that of green bonds, which are used to finance projects with environmental benefits. However, an independent assessment is not required to obtain the ‘European Defence Bond’ label. Companies based in the European Union, the European Economic Area (Norway, Iceland and Liechtenstein) or in countries that have cooperation agreements with the EU, such as Switzerland, the United Kingdom and Ukraine, are eligible to act as issuers. Alternatively, companies that generate more than 50 per cent of their revenue, investments, operating costs or staff costs within this geographical scope are also eligible for the label.
There is a wide range of activities eligible for funding through these bonds: research and development, the production of defence systems, the modernisation of military platforms, cyber defence, surveillance and intelligence, the protection of critical infrastructure, military logistics and maintenance, repair and overhaul (MRO) activities, space and satellite assets, civil protection and enabling services. Activities related to the production of chemical and nuclear weapons, however, remain excluded. Import and export operations may also be permitted, subject to strictly defined limits and in accordance with authorisations from national authorities.
There is no minimum issue amount. This means that minibonds issued by small and medium-sized enterprises operating in the defence sector – for example, in the manufacture of drones, optical systems, technical clothing or armaments – can also be placed on the market. Among the European countries that have shown an interest in these instruments, alongside France – which has been the most active – are Germany, Poland and the Nordic countries.
The initiative was launched in 2025 and currently comprises six issues listed on Euronext, from four issuers. The first was issued by the French banking group BPCE, which also controls Natixis, and involved the placement of a €750 million bond with a coupon of 3.125%. The issue attracted orders totalling €2.8 billion, confirming the market’s strong interest in the defence sector. This was followed by a €500 million bond from Exail Technologies and a €1 billion bond from the French agency Bpifrance. In addition to these, there were three issues of less than €50 million arranged by Natixis CIB: two of €30 million and one of €20 million. Total market capitalisation stands at around three billion euros. For issuers, the main advantage over a traditional bond is greater visibility amongst institutional investors and funds specialising in the defence sector, who can identify these instruments more easily thanks to their specific label. Furthermore, Defence Bonds benefit from a ‘fast-track’ admission procedure for listing on Euronext.