Europe Just Capped Its Biggest Week for Company Bond Sales

  • Companies sell 23 billion euros of bonds on ECB stimulus
  • Borrowing costs in single currency plummet versus dollar

Corporate bond sales in euros surged to a record this week as borrowers clamored to sell debt made cheap by the European Central Bank’s inclusion of company notes on its quantitative-easing shopping list.

Issuance jumped to about 23 billion euros ($26 billion) from 8 billion euros the previous week, according to data compiled by Bloomberg, fueled by Anheuser-Busch InBev NV’s 13.25 billion-euro sale, the biggest ever in the single currency. The brewer joined Deutsche Telekom AG, Fomento Economico Mexicano SAB and Relx Group Plc in selling euro bonds. U.S. delivery provider FedEx Corp. is also planning to come to the region’s market to sell its first non-dollar bonds.

Mario Draghi’s extension of ECB stimulus to include investment-grade non-bank bonds fueled the issuance boom, which accounted for almost a third of this year’s 77 billion euros of sales. Borrowing costs in euros relative to dollars plunged to the lowest on record and the ripple effect reached junk-rated notes as investors sought higher-yielding assets.

“The market rocks now,” said Christian Reusch, co-head of global syndicate at UniCredit Bank AG in Munich. “Within a very short period of time we are starting to catch up quite quickly on what we might have missed in the first 10 weeks of the year. A level of certainty is back.”

The average yield investors demand to hold highly rated euro corporate bonds fell to 1.16 percent on March 14, compared with 3.52 percent for similarly rated dollar notes, according to Bank of America Merrill Lynch index data. The spread was 2.25 percentage points on Thursday. Average yields on euro-denominated junk debt fell to a three-month low after Draghi’s announcement last week.

Fund Inflows

The ECB’s move also spurred the biggest investments into high-grade and speculative-grade funds in 53 weeks, according to Bank of America, citing EPFR data. The $857 million plowed into junk-bond funds represented the fourth consecutive week of gains, following 11 weeks of outflows.  

“The ECB has compressed yields and made corporate high-yield funds attractive in relative terms,” said Patrick Zeenni, the Paris-based deputy head of high yield and credit arbitrage management at Candriam France SAS, which oversees 94 billion euros.

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