Sanofi became the first nonfinancial private company to issue debt that yields less than zero as the busiest year for investment-grade corporate bond issuance resumes.
The French drugmaker sold 1 billion euros ($1.12 billion) of three-year notes at a yield of minus 0.05 percentage point, according to people with knowledge of the matter. German household products maker Henkel may sell 500 million euros ($558 million) of two-year notes also at a yield of minus 0.05 percentage point, said the people, who asked not to be named because the deal is private.
The deals come amid a flurry of planned issuance in Europe and the U.S. Glencore, the world's biggest coal exporter, is seeking to issue seven-year euro bonds to “refinance upcoming maturities at competitive levels,” a spokesman said on Tuesday. Home Depot is planning a two-part debt sale for general corporate purposes.
Borrowers are tapping debt markets on investors' first morning back at work after the summer break came to an unofficial end following the Labor Day holiday in the U.S. on Monday. 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 that suppressed borrowing costs.
“There's a lot of cash to be put to work now, so, first come first served,” said Hyung-Ja de Zeeuw, an Amsterdam-based senior credit strategist at ABN Amro Bank. “You want to be in the first round of deals.”
Officials at Paris-based Sanofi and Dusseldorf, Germany-based Henkel weren't immediately available to comment on the sales.
Euro Sales
Nonfinancial companies including Telefonica SA and Coca-Cola Co. have sold almost 190 billion euros of bonds this year, the most for the period in any year since the introduction of the single currency in 1999, according to data compiled by Bloomberg. Total issuance reached a record 230 billion euros last year, the data show.
Sterling-denominated sales were given a summer boost when the Bank of England followed in the footsteps of the ECB and said it planned to buy corporate bonds as part of its measures to stimulate the U.K. economy. Issuance reached 3.4 billion pounds ($4.5 billion) last month, the most for any August in data going back to 1999 and the biggest monthly tally since January 2014.
The ECB and BOE both loosened monetary policy this year is response to concerns that slowing growth in China, weak consumer prices and the U.K.'s decision in June to leave the European Union may precipitate a region-wide recession. The European Central Bank held a total 20.5 billion euros of the debt as of Sept. 2.
That helped push the average yield on investment-grade euro debt to a record low of 0.62% last week, and it was at 0.64% Monday, according to Bloomberg Barclays index data. For sterling debt, the average yield is 2.17% after reaching a low of 2.06% last month.
“This is an attractive time to issue,” said Gordon Shannon, a London-based money manager at TwentyFour Asset Management, which oversees 7 billion pounds of assets. “The all-in cost of borrowing is currently very low with spreads and yields at historical lows. The ECB and Bank of England's presence in the market buying corporate bonds creates an excellent technical backdrop.”
Bloomberg News
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