Europe Corporate-Bond Sales Pick Up After Fed-Induced Hiatus

  • Telecom Italia, BASF among new issuers in resurgent week
  • Surge puts 2016 on course to be busiest year since 2009

Companies are returning to Europe’s bond market after Wednesday’s Federal Reserve meeting ended uncertainty about U.S. interest rates.

Telecom Italia SpA issued 1 billion euros ($1.1 billion) of nine-year notes, helping to push issuance in 2016 closer to a seven-year record, according to data compiled by Bloomberg. NH Hotel Group SA, which pulled a bond sale citing unsatisfactory markets last year, sold 285 million euros of seven-year notes, the data who. 

The Friday flurry will fail to prevent this being the quietest week of the month for European corporate-debt sales after issuance dried up ahead of the Fed rate decision and a Bank of Japan meeting. The U.S. central bank eventually decided against its second interest-rate increase since 2006.

The policy decisions “just created too much uncertainty,” said Hyung-Ja de Zeeuw, an Amsterdam-based senior credit strategist at ABN Amro Bank NV. “If the Fed would have started its tightening cycle, we would have felt the impact in European markets as well.”

The rebound in issuance may stretch into next week, as a number of companies are readying to meet investors. U.K. engineer Babcock International Group Plc plans to market a sterling bond, while Verizon Communications Inc. may sell bonds in euros, pounds or both, according to separate people familiar with the companies’ plans.

Officials at Milan-based Telecom Italia and NH Hotel weren’t immediately available to comment on the sales.

German chemical maker BASF SE sold 500 million euros of 15-year bonds, according to a person familiar with the deal who isn’t authorized to speak publicly and asked not to be identified. Officials at the Ludwigshafen, Germany-based company didn’t immediately comment on the deal.

Autumn Surge

Companies have sold about 5 billion euros of bonds this week, compared with 11.3 billion euros last week, according to data compiled by Bloomberg. 

Even so, an autumn surge in euro debt issuance has taken the 2016 total to more than 250 billion euros, about 2 percent from the year-to-date tally in 2015 and 7 billion euros off the record set in 2009. Companies including drugmaker Sanofi and miner Glencore Plc raised funds in Europe’s markets as European Central Bank and Bank of England stimulus pushes down borrowing costs.

The average yield on investment-grade euro bonds fell to a record 0.59 percent on Sept. 7, and was 0.65 percent on Thursday, according to Bloomberg Barclays index data.

The decline in issuance contributed to investors retreating from European fixed-income funds this week. Outflows reached a 12-week high in the week ended Wednesday, according to a Bank of America Corp. research note, which cited EPFR Global data. A net $1.3 billion left high-yield funds in Europe, while flows in and out of investment-grade funds were about equal.

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