Wall Street Journal
February 1, 2012
In an abrupt change of heart, U.S. bond investors are embracing corporate Europe's risky side.
European companies rated below investment grade sold $12 billion worth of bonds and loans in the U.S. over the past two weeks, compared with $11 billion issued for all of the fourth quarter, according to Standard & Poor's LCD. That is the most issued by European companies in a two-week period since at least 2007, and more than $3 billion is slated for sale this week.
These issuers are largely casualties of the lending squeeze in Europe, where bank loans dominate credit markets. Faced with debt coming due, they are turning to the U.S. high-yield, or "junk," bond market, where investors are awash in cash and where borrowing costs are falling. The yield on the Barclays U.S. high-yield bond index was 7.5% on Jan. 27, down from 8.6% in mid-December. As investor confidence in Europe improved throughout January, average yields on euro-denominated high-yield bonds dropped to 8.39% from 10.5% at the end of last year, according to Credit Suisse.
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