The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Yankee bonds: European banks turn to eager US investors

Record amount of yankee bond issuance in January; Should US investors be more cautious?

In the first two weeks of the year 54 yankee bonds were issued by banks, raising more than $36 billion – more than the entire 2010 issuance, according to Dealogic. More deals are expected in February. European banks such as Lloyds TSB, Barclays, Nordea, BNP Paribas, Barclays and Crédit Agricole all turned to the US to raise money. Rabobank Nederland sold $2.75 billion in yankee bonds.

The deluge of issuance is in part a result of the negative euro-dollar basis swap.

Jeff Meli and Bradley Rogoff, credit analysts at Barclays Capital in New York, explained the situation in a January report.

"A negative basis swap spread benefits the European issuer by lowering its effective cost of funding relative to issuing directly in the EUR market," they wrote. "Currently, the five-year USD-EUR basis swap spread is –26bp. This means that a European bank needing five-year EUR funding can pay 26bp less (Euribor plus the negative 26bp five-year basis swap spread) for EUR funding by issuing a USD bond and entering a cross-currency basis swap, compared with issuing a EUR-denominated bond directly (in which it would be required to pay Euribor)."


Negative EUR/USD basis swap boosts Yankee bonds

Five-year basis swap


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree