Issuers in Europe Will Never Have It So Good, Deutsche Bank Saysby
Borrowers in Europe’s corporate-bond market will never have it as good as they did in 2015, according to Deutsche Bank AG.
“It’s the kind of market that will never be repeated,” said Henrik Johnsson, head of EMEA debt syndicate at the German lender. This year’s record-low borrowing costs are unlikely to be seen again as investors now realize that there is a limit to how far the European Central Bank can act to boost the economy, he said.
Companies have issued 900 billion euros ($970 billion) of notes this year, the most since 2012, as international borrowers including Apple Inc. and China Petrochemical Corp. take advantage of borrowing costs driven down by the ECB’s quantitative easing program. QE also helped push the yield on German sovereign bonds, which dictate the price of European corporate debt, below zero.
“Having the bund rate negative all the way up to five years was unprecedented,” London-based Johnsson said. “It’s unlikely to happen again.”
The ECB started buying 60 billion euros of bonds a month in March, fueling a decline in the average yield on investment-grade corporate notes in the single currency to a record low 0.85 percent that month, according to Bank of America Merrill Lynch index data. The average yield for the year is 1.19 percent, compared with 3.23 percent for equivalent dollar-denominated debt.
U.S. companies sold a record 101.5 billion euros of bonds this year, according to data compiled by Bloomberg.
The ECB last week extended QE through to at least 2017, without increasing the size of monthly purchases.