American companies have raised 39 billion euros ($53 billion) from debt sales this year, compared with 20 billion euros in 2012, according to data compiled by Bloomberg. The average yield gap between investment-grade bonds in euros and dollars is 1.3 percent, approaching the widest discount for borrowers in the common currency since Sept. 13, Bank of America Merrill Lynch index data show.
The European Central Bank’s decision to cut its benchmark rate last month as it seeks to boost a sputtering recovery in the 17-nation bloc helped extend the advantage for borrowers in euros. Speculation the Federal Reserve will start reducing stimulus increased yesterday when data showed U.S. manufacturing grew in November at the fastest pace in more than two years.
“The euro market is much cheaper than the dollar market today,” said Microsoft Treasurer George Zinn in an e-mailed response to questions. “We are being opportunistic and looking at rates across the globe. We can use the proceeds from these bonds for any general, domestic purpose.”
The world’s largest software maker is offering 3.5 billion euros of notes. The Redmond, Washington-based company is selling 1.75 billion euros of eight-year bonds at 50 basis points more than the mid-swap rate and 1.75 billion euros of 15-year notes at a spread of 75 basis points.
The cost to exchange the proceeds into dollars with five-year cross-currency basis swaps dropped to 11.3 basis points below the euro interbank offered rate on Oct. 30, the lowest in more than five years, and is now 15.8 basis points below the benchmark.
The company first sold notes in the currency in April, pricing 550 million euros of 20-year bonds with a spread of 55 basis points, Bloomberg data show. The securities dropped 1.3 cents on the euro today to 91.3 cents, the lowest since Oct. 21.
Charlotte, North Carolina-based Bank of America is selling five-year securities at a spread of about 95 basis points more than swaps, according to a person familiar with the deal, who asked not to be identified before the transaction is completed.
Bank of America is also raising at least 250 million pounds ($410 million) from 13-year notes. Jerome Dubrowski, a spokesman for the lender in Charlotte, declined to comment on the bond sales.
“U.S. companies are funding cheaper in euros than in dollars thanks to the yield differential,” said Geraud Charpin, a fund manager at Bluebay Asset Management Ltd. in London, which oversees $55 billion. “There is a clear divergence in central bank policy with the U.S. considering tapering whereas in Europe we’re still in monetary easing mode. We should see more U.S. issuers in the euro market this month and the start of 2014.”
The average yield investors demand to hold investment grade notes in euros is 2 percent, one basis point above the five-month low reached Nov. 7, Bank of America Merrill Lynch index data show.
Also in the new issue market today, Barclays Plc (BARC), the U.K.’s second-largest bank by assets, is selling 1 billion euros of additional tier 1 notes to yield 8 percent. Additional Tier 1 bonds are written off or convert to equity when a lender’s core capital ratio falls below a certain percentage of risk-weighted assets.
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