Negative-yielding corporate debt disappears as euro yields hit 8-year high

By Yoruk Bahceli

(Reuters) – Yields on euro investment-grade corporate bonds have climbed to their highest in over eight years, a widely-followed index showed on Friday.

Surging bond yields this year also means that there are no more non-financial corporate bonds left trading with negative yields, BofA said on Friday, down from a peak of nearly 900 billion euros last year.

Yields on the widely-followed ICE BofA euro corporate index rose to 1.992% at Thursday’s close, the highest since January 2014, eclipsing a peak at the start of the pandemic in early 2020.

The yield has risen four-fold from around 0.50% at the start of the year as a hawkish pivot from central banks across the world has sent interest rates sharply higher.

Rising rates has also lifted the shadow of negative yields over non-financial corporate debt, which peaked at nearly 900 billion euros ($946.98 billion) last year, BofA said.

Euro corporate debt came under increased pressure as the European Central Bank has opened the door to 2022 rate hikes in February and the invasion of Ukraine, a much bigger risk for the bloc’s companies, pushed borrowing costs even higher.

Money markets moved on Friday to price in over 90 bps ECB of rate hikes over the remainder of the year

Rising rates and high volatility in markets has all led to a sharp fall in corporate debt issuance this year.

A mere $93 bln equivalent of bonds have been issued in euros and sterling from European non-financial companies, the lowest since 2017, according to Refinitiv data to April 27.

($1 = 0.9504 euros)

(The story refiles to clarify headline.)

(Reporting by Yoruk Bahceli; Editing by Saikat Chatterjee)