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Draghi Bid Ups Bond Sales
World Economy

Draghi Bid Ups Bond Sales

Mario Draghi is propelling European corporate bond issuance toward a record. Non-financial companies sold €49.4 billion ($56.3 billion) of notes in the single currency in March, just €400 million shy from an all-time high of €49.8 billion a year earlier, according to data compiled by Bloomberg.
Issuance last month eclipsed the €34.8 billion of capital raised in January and February, and was the third highest on record, the data show.
The European Central Bank president’s announcement of an expansion of its €1.5 trillion stimulus package to include corporate bond purchases fueled a recovery in issuance from the worst start to a year since 2011. Investors and borrowers had previously shunned the region’s credit markets amid a slump in commodity prices and concerns that global growth was slowing.
“If I were a corporate, I would make hay while the sun shines,” said Eden Riche, the London-based global head of high-yield and emerging-markets syndicate at ING Bank NV. “At these levels, corporate users of the debt capital markets should be looking to sell as much as possible for as long as possible.”
Draghi said on March 10 that the ECB will begin buying corporate bonds at the end of the second quarter. Purchases will consist of high-grade non-financial bonds from companies in the eurozone, he said, without naming specific issuers or securities. The decision marks a dramatic expansion of the central bank’s program to bolster the 19-nation eurozone’s lackluster economy.
The announcement drove down the cost of debt and brought some of the most creditworthy companies closer to borrowing for free. Sanofi, France’s biggest drugmaker, sold bonds in euros with the lowest yield on record for a non-financial company on Tuesday, data compiled by Bloomberg show.
It also fueled a rally in secondary markets, where about €21 billion of highly rated corporate bonds are trading with yields below zero, the data show.

 

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