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European blue-chip bond yields slip into negative territory
2015年2月17日 / 下午4点48分 / 3 年前

European blue-chip bond yields slip into negative territory

* EDF, Shell, Nestle debt offered at sub-zero rates

* Central-bank easing pulling down borrowing costs

* Firms likely to issue negative-yld debt - investor

By Lionel Laurent and John Geddie

LONDON, Feb 17 (Reuters) - Bonds issued by European blue chips such as EDF, Nestle and Royal Dutch Shell have slipped into negative-yield territory as investors seek refuge from sub-zero central bank rates.

While this for now is only indicated by secondary market prices, some investors believe it is only a matter of time before companies actually issue bonds at negative rates.

“I think we are bound to get to negative (transaction) yields eventually on these companies,” said Yannick Naud, an independent London-based fund manager.

“Investors are having to choose between a bank deposit rate that is negative and a company rate that is slightly less negative. The company may be the better credit risk, particularly if it is AAA-rated.”

The European Central Bank’s monetary easing measures - including a deposit rate at -0.2 percent and a pledge to buy 1 trillion euros of bonds - have turned bond markets on their head, with investors seemingly willing to pay for the privilege of lending to the most trusted borrowers.

A Reuters analysis of top-rated euro-denominated corporate debt showed bonds maturing in the next couple of years from France’s EDF, Switzerland’s Nestle, German railway firm Deutsche Bahn, energy major Shell and drugmakers Sanofi and Novartis were all trading with an ‘offer’ yield of below zero.

The ‘offer’ indicates the level at which holders are prepared to sell their security. The ‘bid’, an indication of what investors are willing to pay for the bond, remains in positive territory for these companies.

In Swiss markets, where the central bank has cut the deposit rate to -0.75 percent, issuers such as Japanese carmaker Toyota and French oil firm Total have bonds with both bid and offer yields below zero, according to data on the SIX Swiss exchange.

But so far only the German and Swiss governments have actually sold sovereign debt at negative yields, as have the German region of Lower Saxony and the Swiss mortgage lender PS Hypo.

It’s not all about capital preservation, of course: these same market forces are serving to make European equities, which have an average dividend yield of around 3.5 percent, even more attractive despite the euro zone’s economic woes.

Exposure to euro zone equities jumped in February to the highest since May 2007, according to a monthly Bank of America-Merrill Lynch survey of 196 fund managers who manage $559 billion of funds. (Reporting by Lionel Laurent and John Geddie)

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