Corporate Europe Embraces Bonds as Yields Plunge to Record Low

Updated on
  • Another 2.1 billion euros of sales added to week’s tally
  • Negative yields have spread to non-financial euro bonds

There’s no stopping the flood of corporate bond sales in Europe, with companies locking in record-low borrowing costs on another 2.1 billion euros ($2.4 billion) of debt.

Spain’s Ferrovial Emisiones SA sold bonds maturing in September 2022 and Thermo Fisher Scientific Inc. issued 1.6 billion euros of debt, according to data compiled by Bloomberg. Schaeffler AG of Germany said it is seeking to sell the equivalent of 2.8 billion euros of securities. Debt issuance on Tuesday, including those in the financial sector, totaled about 11 billion euros.

Companies are clamoring to sell debt in Europe as central bank stimulus helps to push down borrowing costs. The surge may gain new impetus after drugmaker Sanofi and German household products maker Henkel AG issued notes with negative yields on Tuesday, the first time a company outside the banking industry has been able to get paid to borrow in euros.

“The deals will just keep coming and coming,” said Anthony Peters, a strategist at Sol Capital Markets in London. “No one’s stopping them with the European Central Bank keeping a lid on borrowing costs. It’s a momentum-driven market.”

Officials at Waltham, Massachusetts-based Thermo Fisher and Madrid-based Ferrovial weren’t immediately available to comment on the sales.

Record Issuance

Medical-equipment manufacturer Thermo Fisher issued 1 billion euros of eight-year bonds and 600 million euros of 12-year notes, and Ferrovial sold 500 million euros of notes, the data show. The U.S. company previously sold euro debt in August.

Schaeffler is marketing five-, seven- and 10-year securities in the single currency and dollars, the company said. The maker of auto components and industrial bearings is selling so-called payment-in-kind toggle notes via its holding company IHO Holding, which give it the option to pay interest with more debt or cash, according to a company statement on Wednesday.

Investors bought 400 million pounds ($533 million) of U.K. ad giant WPP Plc’s September 2046 notes, according to data compiled by Bloomberg.

‘Perfect Environment’

Companies are on track to issue a record amount of investment-grade bonds in euros this year after the European Central Bank increased stimulus measures to boost the economy. Non-financial borrowers have sold more than 190 billion euros of bonds, the most for the period in any year since the introduction of the single currency in 1999, according to data compiled by Bloomberg.

Borrowing costs have fallen to records in Europe and the U.K. after the ECB and Bank of England announced plans to add corporate bonds to their asset-purchase lists and cut their main interest rates. The average yield on investment-grade euro bonds slid to a record low of 0.6 percent on Tuesday, according to Bloomberg Barclays index data. For sterling debt, the average yield is 2.14 percent after reaching a low of 2.06 percent last month.

“We have a perfect environment for any company that wants to raise money to get successful deals done,” said Chris Bowie, a London-based money manager at TwentyFour Asset Management, which oversees about $9 billion.

(Updates with daily total in first paragraph.)
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