Deutsche Bank AG and Rabobank Nederland led European lenders selling US bonds yesterday ahead of euro-area countries, beset by the sovereign debt crisis, that need to raise $1.1 trillion this year.
Germany’s biggest bank issued $1 billion of five-year notes in its first dollar-denominated sale since March, while Rabobank sold $2.75 billion of securities, according to data compiled by Bloomberg. European lenders offered $7.25 billion of bonds yesterday, driving corporate sales to $21.2 billion, the most since September 2009, while today saw the year’s first senior bank bonds in euros.
European banks are competing for investors after the region’s crisis drove borrowing costs for its most indebted governments to the highest on record. For financial companies, relative yields on dollar-denominated debt are at the tightest since May, while spreads on bonds in euros are about the widest since July, Bank of America Merrill Lynch index data show.
“It will be a challenge to raise funds at least in the early part of this year,” said John Stopford, who helps oversee about $65 billion as head of fixed-income at Investec Asset Management Ltd in London. As redemptions come due in the first half of the year for Portugal and Spain, “more clarification on how and in what form support might be necessary would be a constructive thing,” he said.
The banks are taking advantage of investor demand for higher-rated financial debt, said Michael Gower, the head of long-term funding at Rabobank. The Utrecht, Netherlands-based company, which has top credit ratings from Moody’s Investors Service and Standard & Poor’s, split its sale yesterday between $1.5 billion of 4.5 per cent, 10-year bonds and $1.25 billion of 1.85 per cent, three-year notes, Bloomberg data show.
Bonds in euros
Societe Generale SA and Italy’s Intesa Sanpaolo SpA are today offering 2011’s first senior note sales from banks in the region, Bloomberg data show.
“Following recent events in sovereign markets and peripheral sovereign bond markets, there’s a lot of questions about banks in general, or frankly anything out of Europe,” Gower said. “People realize they have to be exposed to Europe, and if they choose to do that, they’ll choose to do it with Rabobank or something without a high risk attached to it.”
Elsewhere in credit markets, issuance surged in the US yesterday to the most since companies sold $22.6 billion of bonds on September 15, 2009, Bloomberg data show. General Electric Co’s finance arm sold $6 billion of bonds in the largest offering since February 4, 2010, when Kraft Foods Inc. sold $9.5 billion of bonds and Berkshire Hathaway Inc issued $8 billion of debt.
