The Rising Influence of Rising Affluence

[jbog]

Now Companies Are Getting Paid to Borrow

Europe’s Henkel and Sanofi set to sell bonds with negative yields as ECB buying drives down rateS.

By CHRISTOPHER WHITTALL
Sept. 6, 2016 8:46 a.m. ET

LONDON—Two large European companies are set to be paid by investors to borrow, taking advantage of ultralow interest rates spurred by the European Central Bank’s corporate bond-buying program.

German multinational Henkel AG and French drugmaker Sanofi SA are set to pay a yield of minus 0.05% on new issues of short-dated bonds on Tuesday, according to deal notices released to investors. The fund raising is another sign of how unprecedented monetary policy has turned conventional investment theory on its head.

Yields on corporate debt have plunged in recent months as investors have pushed up prices in the scramble for returns. Roughly €717 billion of eurozone investment-grade bonds traded at a negative yield as of the end of August, or over 30% of the entire market, according to data provider Tradeweb.

The ECB had bought over €20 billion of corporate bonds as of Sep. 2, after launching its program in early June, with most of its purchases coming in secondary markets, where investors buy and sell already-issued bonds.

http://www.wsj.com/articles/now-companies-want-to-borrow-money-for-free-1473165990