Deutsche Bahn AG, Germany’s state-owned railway, is issuing 300 million euros ($414 million) of bonds as European borrowing costs hold at the lowest in four months.
The seven-year notes will be issued through the company’s Deutsche Bahn Finance BV unit to yield about 28 basis points more than the mid-swap rate, according to a person familiar with the matter. The average yield investors demand to hold investment grade bonds in euros was little changed at 1.9 percent, the lowest since June 19, Bloomberg bond index data show.
Bond investors are being encouraged by speculation the Federal Reserve won’t reduce its stimulus program until March as policy makers await signs the U.S. economy and labor market are improving. Euro credit markets have also been buoyed by data showing the currency bloc is recovering from its longest-ever recession.
“The delay in tapering has been one of the drivers of falling yields,” said Richard Klijnstra, the head of credit at Kempen Capital Management NV in Amsterdam with 1.6 billion euros under management in credit. “We’ve also seen an uptick in economic data which has been good for risk assets.”
The cost of insuring corporate debt against losses fell to the lowest in a week, with the Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings dropping as much as two basis points to 85 basis points in London.
Also in European credit markets today, Eramet SA, a Paris-based mining company, is selling debut bonds. The unrated borrower is raising 300 million euros to 500 million euros of seven-year notes that will yield 4.625 percent to 4.75 percent, according to a person familiar.
“Some deals in the market are really taking advantage of the current climate of low yields,” said Klijnstra. “We’re looking in particular at non-rated issues because they have to pay a premium to come to the market, and we’re positive on subordinated paper as well.”
Solvay SA, a Belgian manufacturer of chemicals and plastic, hired banks to arrange European investor meetings for a deeply subordinated undated bond sale. The Brussels-based company that’s planning to put its polyvinyl chloride assets in a joint venture with Ineos Group Holdings SA, will sell the notes through its Solvay Finance SA unit.
CaixaBank SA, Spain’s third-biggest bank, will hold an investor call today for a sale of subordinated Tier 2 bonds in euros that may price tomorrow, according to a person familiar.