Clearstream has settled a debut €1 billion digitally native benchmark bond for the European Stability Mechanism (ESM) through Pontes, the Eurosystem’s newly launched platform for settling DLT-based wholesale transactions in central bank money.
It is the first DLT-based bond issued by a European supranational to settle through Pontes, which the European Central Bank and euro area national central banks launched on 21 September.
Acting as the Pontes Market DLT Operator, Clearstream creates and manages the bond in digital form on the Clearstream Digital Infrastructure. Delivery-versus-payment settlement of the securities leg takes place on its D7 DLT platform, while the cash leg settles via Pontes directly in TARGET (T2).
The Deutsche Bundesbank is acting as issuing and paying agent and has been onboarded to Pontes as a market participant. DZ BANK and Société Générale are advisory banks.
Linking to traditional rails
The bond is designed to sit within existing market plumbing. Using Clearstream’s hybrid model, it can move from the D7 environment into traditional infrastructure, where it can settle via TARGET2-Securities (T2S). It is expected to be listed on the Luxembourg Stock Exchange and to be eligible as collateral for Eurosystem monetary policy operations through the Eurosystem Collateral Management System (ECMS). It is also expected to be accepted as collateral at Eurex Clearing and included in Eurex Repo’s general collateral baskets, supporting secondary-market liquidity.