Negative Yields Seep Into Shell, Siemens Debt on ECB Distortions

  • About 16 billion euros of bonds have yields quoted below zero
  • Fund managers parking cash in high-quality corporate debt

Royal Dutch Shell Plc and Siemens AG bond yields have dropped below zero, highlighting how European Central Bank stimulus is contorting the region’s credit markets.

Traders are quoting yields of minus 0.026 percent on the oil company’s 2.5 billion euros ($2.8 billion) of notes maturing in May 2018, according to data compiled by Bloomberg. Yields on some notes of French drugmaker Sanofi also dropped below zero this week.

About 16 billion euros of highly rated corporate bonds are trading with yields below zero as negative deposit rates spur money managers to look for alternative safe places to park cash. Bond prices have also been bolstered by the ECB’s plan to start buying non-bank corporate notes, as policy makers seek to drive investors into riskier or longer-dated debt.

“It’s part of the ECB’s very clear message,” said Luke Hickmore, an Edinburgh-based senior investment manager at Aberdeen Asset Management, which oversees about 291 billion pounds ($410 billion). “Take risks -- whether that’s credit quality or maturity -- and help us finance businesses for the longer term.”

Siemens’ 1.6 billion euros of bonds maturing in June 2018 yield minus 0.024 percent, according to data compiled by Bloomberg. Sanofi’s 1.5 billion euros of bonds due May dipped below zero for the first time Wednesday and were at 0.02 percent Thursday.

An official for Munich-based Siemens couldn’t immediately comment on the bonds. Spokesmen for Shell, based in The Hague, The Netherlands, and Sanofi declined to comment.

The ECB is expanding its bond-buying program to 80 billion euros a month and moving beyond government and covered bonds after crushing yields in these markets. About 2 trillion euros of sovereign bonds yield less than zero, according to data compiled by Bloomberg. In the covered-bond market, Berlin Hyp AG earlier this month sold debt with a negative yield, making it the first non-government issuer to get paid to borrow in the single currency.

Other corporate bonds quoted with negative yields in the secondary market include those issued by German industrial-gas supplier Linde AG, according to data compiled by Bloomberg. Drugmakers GlaxoSmithKline Plc and Roche Holding AG are also on the list.

“This is about quality more than anything else,” said Hickmore. “We’re going to see even more.”

Before it's here, it's on the Bloomberg Terminal.