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Johannesburg - Sanofi and Henkel AG are poised to become the first non-financial private companies to sell debt that yields below zero as the busiest year for investment-grade corporate bond issuance resumes.
German household products maker Henkel may sell €500m ($558m) of two-year notes at a yield of minus 0.05 percentage point, according to people with knowledge of the matter. French drugmaker Sanofi is offering €1bn of three-year notes that may yield 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. Glencore, the world’s biggest coal exporter, is seeking to issue seven-year euro bonds to “refinance upcoming maturities at competitive levels,” a spokesperson said on Tuesday. Sanofi is offering euro notes in three parts, while Henkel is selling a four-part deal denominated in dollars, euros and pounds, according to the people.
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 US 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 NV. “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
Non-financial companies including Telefonica SA and Coca-Cola Co. have sold almost €190bn 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 €230bn 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 UK economy. Issuance reached £3.4bn ($4.5bn) 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 €20.5bn of the debt as of September 2.
Low yields
That helped push the average yield on investment-grade euro debt to a record low of 0.62% last week, and was at 0.64% on Monday, according to Bloomberg Barclays index data. For sterling debt, the average yield is 2.17 percent 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 £7bn 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.”
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