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Sub-zero yields on over half of euro investment-grade company debt-Tradeweb

08/02/2021 | 10:59am EDT

Aug 2 (Reuters) - More than half of all investment-grade corporate bonds in the euro zone now trade with sub-zero yields, with the pool growing in July to its biggest on record, Tradeweb data showed on Monday.

Bond markets rallied sharply in July, sending yields tumbling across the world as a slowdown in economic momentum, fears around the Delta coronavirus variant and the unwinding of bets against bonds all sent investors into fixed income markets, supported by dovish messaging from central bankers.

Credit markets were a key beneficiary and some 1.87 trillion euros of investment-grade corporate debt traded on the Tradeweb platform closed July with a sub-zero yield, accounting for 50.7% of the nearly 3.7 trillion euro market.

That's the highest on record, according to data going back to 2016.

In June, negative-yielding corporate debt amounted to 1.3 trillion euros, or 37.5% of the total.

The bond rally halved the average yield on the ICE BofA euro corporate index to 0.15% in July, while the premium such debt pays over safer assets shrank to the smallest since 2018.

Investment-grade funds have recorded nine straight weeks of inflows up to July 28, according to BofA data, citing EPFR figures, and attracted the highest inflows in over a year in the week to July 14.

Corporate bonds in Europe were also helped by a very quiet primary market in July. Only 8.8 billion euros of corporate issuance came to market, far below an average of 20 billion euros normally seen in July, according to ING.

Analysts said this was due to the large amount of pre-funding corporates completed earlier in the year.

The pool of negative-yielding euro-denominated government debt, meanwhile, rose to its highest since January at 6.54 trillion euros, or 70.8% of the total, according to Tradeweb.

The pool of negative-yielding British government bonds increased slightly to 684 billion pounds, still 26% of the total market, unchanged from May and June.

(Reporting by Yoruk Bahceli Editing by Sujata Rao and Mark Potter)


ę Reuters 2021
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