Corporate Borrowing Costs Fall to Record in Europe as ECB Buys

Company borrowing costs fell to a record in Europe as investors compete with the central bank for limited supply.

Average yields on investment-grade bonds in euros dropped to an all-time low of 0.7 percent on Friday, Bank of America Merrill Lynch index data show. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies fell one basis point to 67 basis points on Monday, according to data compiled by Bloomberg.

Companies have sold about 19 billion euros ($21 billion) of investment-grade bonds since the European Central Bank started purchasing the securities on June 8, less than half the amount sold in May, according to data compiled by Bloomberg. The ECB has accumulated more than 13 billion euros of company bonds in that time as it seeks to help stimulate the region’s economy.

“There is a supply shortage at the moment,” said Anthony Peters, a strategist at Sol Capital Markets in London. “It’s a quiet month for issuance. The ECB buying in the market pulls it even tighter.”

About 26 percent of the 489 corporate bonds the ECB has bought under its purchase program have negative yields, according to data compiled by Bloomberg.

— With assistance by Paul Cohen, and Selcuk Gokoluk

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