Demand for investment-grade corporate bonds in Europe returned this week for the first time in a month as confidence in the U.S. economy outweighed concerns about slowing growth in emerging markets.
The average extra yield investors demand to hold the debt instead of government securities fell 1.2 basis points to 92.5 basis points, the narrowest spread since Jan. 29, according to Bloomberg bond index data. The cost of insuring the notes also declined, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies falling to the lowest level in two weeks.
Investors are awaiting a report that may show U.S. payrolls more than doubled in January while the unemployment rate held at a five-year low, according to economists surveyed by Bloomberg. That’s helping ease concerns that global growth is slowing following the worst selloff in emerging-market currencies in five years.
“There was an air of panic surrounding emerging markets and people are starting to see through the noise,” said Simon Ballard, head of credit strategy at National Australia Bank in London. “Across the capital structure, there’s been renewed appetite in the last few days.”
Non-financial companies led by Verizon Communications Inc. sold 8.2 billion euros ($11 billion) of bonds in Europe this week, the most since the week ending Jan. 17, according to data compiled by Bloomberg.