Microsoft Corp. and China Petrochemical Corp. helped spur record sales of euro bonds by companies outside Europe this year as they took advantage of cheap funding costs and increased confidence in the region.
International borrowers raised 49 billion euros ($67 billion) from bond sales this year, almost double the 26 billion euros issued in 2012, according to data compiled by Bloomberg. The average yield difference between non-financial investment-grade notes in euros and dollars is 1.4 percentage points, 20 basis points from the widest discount in five years, Bank of America Merrill Lynch index data show.
“It’s been quite cheap this year for companies to borrow in euros,” said Craig Veysey, head of fixed income at Sanlam Private Investments Ltd. in London. “The trend will probably continue next year as Europe’s economy doesn’t look to be growing quickly so rates will stay low.”
Global companies are tapping bond markets in the region as European Central Bank President Mario Draghi pledged this month to hold interest rates at a record low “for an extended period of time” to support the nascent economic recovery. The cost to exchange euros into dollars with five-year cross-currency basis swaps dropped to a five-year low in October.
“Corporate borrowers look to match cash flows with the currency that they pay coupons in,” said Veysey. “This year, cross-currency basis swaps have also looked attractive for those converting the currency.”
The gauge fell to 11.3 basis points below the euro interbank offered rate on Oct. 30 and is now at 12.8 basis points, according to data compiled by Bloomberg. That compares with an average 42 basis points below the benchmark in 2012.
U.S. companies dominated non-European issuance this year, led by General Electric Co. The world’s biggest maker of jet engines sold 5.4 billion euros of notes, according to data compiled by Bloomberg. Microsoft was the second-biggest issuer, with 4 billion euros of sales, the data show.