Oct 15, 2013 11:20 PM IST | Source: ft.com

Volume of foreign issued eurobonds jumps

Volume of foreign issued eurobonds jumps

Volume of foreign issued eurobonds jumps

The quantity of bonds denominated in euros issued by non-European companies has reached the highest level since the financial crisis, in another sign of recovering confidence in the eurozone.

So far this year ?35.9bn of euro-denominated bonds have been issued by non-European corporates, up 47 per cent on the same stage last year, and surpassing the previous record of ?34.1bn set for the corresponding period in 2007, according to Dealogic.

"Price is a driver of supply," said Oliver Sedgwick, who heads Goldman Sachs' investment grade syndicate desk for Europe. "From the issuers' side, the stars are aligning to make Europe more attractive."

Yields on US Treasuries, the benchmark for dollar-denominated bonds, have risen since May after Ben Bernanke signalled that the Federal Reserve would start to taper its quantitative easing programme. However, those on German government bonds, the guideline for euro issuance, are being limited by the European Central Bank's intention to keep interest rates low for an extended period.

Bankers say companies have been able to issue bonds paying an interest rate 50 to 60 basis points fewer than they could have in the US bond market, which has also suffered from greater volatility due to uncertainty over the timing of tapering, and concerns over a possible government default.

US issuers account for $18.8bn of euro-denominated bond volume issued by non-European corporates so far this year, up 72 per cent on the same point last year, and the highest volume at this stage of a year since 2007, when it reached nearly ?28bn.

Meanwhile, the proportion of euro-denominated bonds issued by Asia-Pacific companies has jumped to 37 per cent of the total, compared with 33 per cent at this stage last year, according to Dealogic. In recent weeks bonds have been issued by Korea Gas, Sinopec and Cnooc, China's state-run offshore oil producer.

Frazer Ross, managing director of corporate debt syndicate at Deutsche Bank, said Asian companies that were treated as investment-grade by European investors were put by many US investors into the emerging markets basket, which had been under a cloud since the tapering was first mooted in May.

Mr Ross said: "Europe is the world's second biggest capital market. Asian issuers are beginning to realise that in addition to the benefits of diversifying your investor base, Europe is open for good volume and good size at a very competitive price."

The proportion of euro-denominated bonds issued by non-European companies has fluctuated between 5 to 15 per cent of the total in recent years, with the present level being 16.5 per cent, according to Dealogic. Mr Sedgwick said: "Judging from the pipeline, this could be close to 20 per cent by the end of the year."

Total euro-denominated bond volume so far stands at ?217.9bn, an 11 per cent increase on the ?196.5bn issued in the same period last year, and the highest total since the comparable period of 2009 (?270.8bn).



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