Corporates: the hot new asset class?
Corporates have become the darlings of the European bond market. New issuance is running at record highs as investors look for paper yielding decent spreads at a time when government bond yields are low. The birth of the euro has created the opportunity for the corporate bond market to expand rapidly, providing a genuine alternative to the dollar for borrowers and a new asset class for investors. Several companies have already tapped the burgeoning investor demand by issuing large, liquid bonds in the new currency, and the queue of would-be issuers is lengthening all the time. But the syndicated loan market still provides powerful competition to the bond market. And many European companies are so cash rich that they have little need to visit the capital markets anytime soon. Will 1999 be the year when the European corporate bond market finally takes off? Or are investment bankers’ expectations running ahead of reality? Charles Olivier reports.
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