Aug 11, 2021 - Economy & Business

The €180 billion of negative-yielding debt from U.S. companies

Illustration of the Euro and dollar bills in marbles.

Illustration: Sarah Grillo/Axios

Investors are getting negative yields on €180 billion worth of bonds issued by dozens of America's largest corporations, including some that are junk-rated.

Why it matters: The European Central Bank has lowered interest rates so far into negative territory that investors can get a significant pick-up in yield even when buying at negative yields. There’s speculative value to these bonds too — once they’ve broken the zero bound, yields can always fall further, meaning a bond bought at a negative yield can still be sold at a profit.

How it works: Many American companies issue what's known as reverse-Yankee bonds — where they borrow in euros rather than dollars. AT&T has €13.6 billion ($16 billion) of such bonds trading at negative yields, with companies such as IBM, Apple and Procter & Gamble not far behind, according to S&P Global Ratings.

By the numbers: Apple's €1.4 billion bond maturing next year trades at 101.89, for a yield of -0.5%. Its 2029 euro-denominated bond trades at -0.03%. GE, which carries a credit rating of BBB+, has a bond trading at -0.21%.

  • Colfax Corp., a junk-rated manufacturer of medical devices with a rating of BB, has a negative-yielding €350 million bond due in 2025.
  • Between the lines: Negative yields are also found on some bonds issued by American companies in Swiss francs.

The bottom line: Very few U.S. companies actually try to issue bonds at negative yields. In euros, it's only happened once, from Colgate-Palmolive in 2019. Once debt starts trading, however, it regularly gets bid up to levels above the total amount of principal and interest outstanding.

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