A sorry state of the European bond yields has attracted record debit sales by the U.S. multinationals. The scenario indicates how companies are making efforts to derive benefit from the lower costs of borrowing, while also bringing down the effect of visibly weaker Euro. The U.S. MNCs have managed to lift €27.2bn in euro bonds through 24 deals. These deals include multibillion-euro loans from Coca-Cola Co (NYSE:KO), AT&T Inc. (NYSE:T), Kinder Morgan Inc (NYSE:KMI) and Mondelez International Inc (NASDAQ:MDLZ). The amount of loan sold outshines the collective Euro debt sold by the U.S. companies during same times in past six year consecutively.
Tumbling Euro value and borrowing costs is the reason
The biggest reason for this is said to be the tumbling value of Euro as well as the borrowing costs. This happened as the European Central Bank started purchasing huge numbers of bonds in order to kick off the economy again and boost inflation.
And with this scenario in Europe, the U.S. companies found attraction in the visibly low borrowing costs. This led to the competition of issuing the debt in Eurozone and also locking in the low rates of interest. As a result, the number of U.S. based companies issuing Euro bonds touched the zenith as of now in 2015.
Declining Sovereign Bond Yields
Andrew Kresse of JPMorgan Chase & Co. (NYSE:JPM), while talking to Financial Times, said that there has been a considerable decline in the value of bond yields. Resulting this, the businesses have to pay less amount of coupon to plea to the investors. Also, the interest rate differential has increased, due to which, a lot of the U.S. companies are issuing debt in Europe.
This interest rate differential has increased the gap as monetary policy that rests between the U.S. diverges and the Europe.
Not just the U.S. companies, but a lot of Chinese companies are also seen issuing debt in this zone, so far, this year. The divergence has encouraged a prickle in euro-denominated debt sale by a lot of MNCs in China.