Green Bond Greenium Lab (2D)

Bond Terms

Coupon rate 4.50%

Maturity 10 yr

Face value $1,000

Market

Base market yield 4.50%

Greenium 15 bps

Priced Result

Green bond yield

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Conventional yield

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Green bond price

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Conventional price

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Price premium

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Modified duration

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How it works

Both bonds pay the same annual coupon on the same face value for the same number of years — the only thing that differs is the discount rate (yield) the market applies to each. A bond's fair price is the present value of every future cash flow:

P = Σ(t=1..n) C/(1+y)^t + F/(1+y)^n
C = coupon rate × face value
F = face value, n = years to maturity, y = yield

The green bond trades at a lower yield than its conventional twin because ESG-mandated capital pays up for the label — that yield gap is the greenium, expressed here directly in basis points:

yield(green) = yield(base) − greenium/100
yield(conv)  = yield(base)
premium ($)  = P(green) − P(conv)

Because price is a convex function of yield (duration falls as yield rises), the same bps greenium produces a smaller dollar price premium when base rates are high than when they are low — the right-hand chart recomputes both bond prices across a sweep of base rates, holding the bps greenium fixed, so you can see that duration effect directly rather than as an approximation.

Coupon rate / maturity / face value — identical for both bonds; only the credit story differs from the ESG label.
Base market yield — the comparable-maturity yield the conventional twin prices at.
Greenium — the yield discount (bps) the labelled green bond clears at versus its twin.

Real-world relevance: academic studies of primary green-bond issuance typically find a 1–10bp average greenium; this lab lets you push that spread further to see how its dollar impact scales with duration and rate levels.

Price vs. Yield

Price Premium vs. Base Market Rate

Green bond Conventional twin Current setting