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?
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.