Best borrowers 2015: Does QE stand for Quick Euros?
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Best borrowers 2015: Does QE stand for Quick Euros?

The first half of this year has seen explosive growth in euro issuance by non-European borrowers, especially from the US. Is this a sign of greater capacity and sophistication in the market? Or is the reverse yankee just smash-and-grab opportunism?


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You don’t need to be a genius to understand why there was an eye-catching flurry of euro-denominated bonds issued by non-European borrowers in the first quarter of this year. A powerful combination of a favourable cross-currency basis and super low yields in Europe have underpinned rising issuance. So too has the weakening euro. This has alerted non-European corporates to the pitfalls of leaving their foreign exchange exposure unhedged. It has also opened up appealing opportunities to them in the M&A market, with European assets looking cheap in dollar terms.

All of the above helped euro issuance by non-European companies reach $90.5 billion by late April, according to Dealogic, which is a 55% increase on the $58.3 billion raised in the same period in 2014. US borrowers led this wave of so-called reverse yankee issuance, raising $46.8 billion, with Canadian and Australian corporates a distant second and third, borrowing $12.7 billion and $10.8 billion respectively.

Without this support from non-European borrowers, supply in the euro corporate market in the first quarter of 2015 would have been flat. “Supply growth in the euro investment grade sector has very much been driven by US companies and to a lesser extent UK names,” says James Cunniffe, corporate debt syndicate director at HSBC, which led the reverse yankee bookrunner volume as of late April, according to Dealogic.

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