Borrowing costs for companies fell to a record in Europe as policy makers prepare more stimulus measures to prevent stagnant prices from derailing the economic recovery.
U.S. economic growth is too slow to relieve the financial burden caused by “absurdly high levels” of debt, according to Nick Burns, a strategist at Deutsche Bank AG.
European stocks rose to a six-month high this week as the Federal Reserve announced another round of bond purchases to boost the economy, offsetting renewed concern that some European countries won’t be able to repay their debts.
UniCredit SpA and BNP Paribas SA were among banks fueling a surge of bond issuance in Europe as the cost of insuring debt against losses fell to the lowest in almost four years.
The bond market indicator that has predicted every U.S. recession since 1970 may have lost its forecasting prowess, thanks to the Federal Reserve.
Tesco Plc, the U.K.’s biggest grocer, and AT&T Inc., the largest U.S. telephone company, are selling bonds in euros as borrowing costs approach the lowest in 4 1/2 months in Europe.
Junk bonds are rallying for a seventh week, the longest streak since January, amid confidence that European central banks will maintain stimulus measures even as the economy emerges from recession.
The worst may be yet to come in the global financial crisis as the central bank spending that kept defaults low runs out, according to Deutsche Bank AG.
The cost of insuring European corporate bonds is heading for its third weekly increase as yields surge amid concern central banks will curb their efforts to boost economic growth.
Spain led a surge in the cost of insuring European government debt to a record on concern the region’s peripheral nations will struggle to cut budget deficits and repay debt.
"Outright funding levels are very attractive for companies at the moment."
- Nick Burns on May 12, 2014