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US companies are tapping Europe’s debt market at a record pace, attracted by lower borrowing costs on the continent and the chance to diversify their sources of funding, as uncertainty over President Donald Trump’s tariffs triggers big market swings.
Strong demand from European debt investors has allowed US non-financial companies to borrow €40bn in so-called reverse Yankee deals — in which US firms raise money in the euro-denominated bond market — as of May 9, according to Bank of America data. New deals worth multiple billions of euros have been priced since then.
Google parent Alphabet and telecoms firm T-Mobile US are among companies to have priced multibillion-dollar deals, borrowing €6.75bn and €2.75bn respectively. Pfizer issued €3.3bn of bonds across four tranches on Wednesday. If the rate of issuance by US companies in Europe persists, the full-year figure will surpass the previous record of €88bn set in 2019.
This year’s issuance compares with the €30bn of euro bonds that had been issued by US companies by May last year. For the first time ever, US issuers now account for a larger share of Europe’s non-financial investment grade market than borrowers from any other country, according to BofA data.
This year’s surge has also been driven by uncertainty over the scale and fallout from US President Trump’s tariffs, as some companies have opted to borrow quickly and get their funding out of the way in case an economic shock pushes up borrowing costs.
“In a year which has been relatively volatile, global issuers want to get ahead of their funding budget for the year. So you’ve seen what’s probably a relatively frontloaded year from the major issuers,” said Marc Lewell, head of Emea/Apac bond syndicate at JPMorgan.
Large US companies with operations in a number of countries sometimes raise money in Europe rather than the US as a way of diversifying their sources of funding and providing a natural hedge against exchange rate fluctuations. Such reverse Yankee issuance — named in contrast to so-called Yankee bonds sold by foreign borrowers in US markets — becomes more attractive the bigger the difference in borrowing costs.
The gap in yields has widened as the European Central Bank has lowered interest rates faster than the Federal Reserve. The Fed voted last week to keep the federal funds target range at 4.25 to 4.5 per cent for the third consecutive meeting, while the ECB cut its interest rate to 2.25 per cent last month.
The spread between benchmark 10-year US Treasuries and German Bund yields reached more than two percentage points in December, its highest since 2019, though it has since tightened to 1.8 percentage points.
That is mirrored in credit yields, where the additional borrowing costs paid by investment-grade companies in the US last month were two percentage points above those paid in Europe.
“Corporate issuers in the US who have a European business or a European asset base . . . want to take advantage of the fact that euro coupons are significantly lower than dollar coupons,” said Lewell.
Those companies raising and spending euros can also insulate themselves against further currency movements after dramatic foreign exchange rate shifts in recent months. The euro has tumbled from $1.12 in late September to $1.01 in early February, before rallying back to $1.12, as markets have tried to gauge the impact of Trump’s erratic tariff policy. However, for those raising money to bring back to the US, currency hedging costs eat into the benefit from lower rates.
Damien Hill, a corporate bond fund manager at Insight Investment, said the recent wave of issuance had been driven by a cheapening in all-in funding costs for US companies borrowing in euros.
“While this opportunity exists, we expect the volume of US issuers borrowing in euros to remain elevated,” he added.
Reverse Yankees account for 30 per cent of euro issuance this year, according to PwC data. Usually the figure is below 20 per cent.
Barnaby Martin, European credit strategist at BofA, said that French companies no longer dominate European corporate issuance. “The big implication of this is that the euro credit market will probably be more sensitive to US political decisions going forward,” he wrote in a note.
Reverse Yankee bonds also serve as a sign of strength for US companies, allowing them to show lenders that they have multiple large pools of capital available to them and are not limited to executing large transactions in the US.
“Reverse Yankee is a very powerful signal to send back to the dollar market . . . [that] you’re able to do as big euro trades as dollar trades in the market and that’s very positive” for borrowers, said James Marriott, international head of debt capital markets at Wells Fargo.