US companies are increasingly choosing to borrow in euros, with bond sales reaching a record $100 billion so far this year. This trend highlights the attractive funding conditions in Europe and a growing willingness among issuers and investors to shift away from the dollar.
Major companies such as Alphabet, Visa, PepsiCo, Fiserv, and Verizon have recently issued bonds denominated in euros. This type of offshore fundraising, known as “reverse Yankees” in reference to Yankee bonds sold by foreign companies in the US, has risen from just over $78 billion for the entire year of 2024, according to LSEG data.
The trend is seen as positive for the euro, given the dollar’s 10% drop this year due to concerns over erratic US trade policy and as European Central Bank chief Christine Lagarde calls for a “global euro moment.”
“There is a wall of currency ready to be deployed into European credit,” said Matteo Benedetto, EMEA co-head of the investment grade syndicate at Morgan Stanley.
“Behind those inflows, there is a broader trend of asset reallocation into euros and potentially away from the dollar,” added Benedetto, who arranges European debt sales for companies.
ING reported this month that fund flows indicate an increasing preference for euro-denominated debt among global issuers.
Investors and bankers believe the trend of reverse Yankees is likely to continue, given lower borrowing costs, favorable currency market dynamics, and a diversification away from dollars. However, analysts caution that it is too early to declare a turning point in the dollar’s standing.
Currently, the cost of issuing bonds in euros, after swapping the raised funds back to dollars, is comparable or better for US companies than issuing the same in dollars, Benedetto noted.
The surge in reverse Yankee issuance this year has been led by non-financial firms, which have sold nearly 50 billion euros ($59 billion) of bonds, marking a 32% year-on-year increase.
Alphabet, which achieved a market capitalization of $3 trillion for the first time on Monday, raised almost 7 billion euros in a bond sale in May. Fiserv tapped the market for 2.175 billion euros in the same month, and Verizon raised 2 billion euros in July by selling seven and 12-year notes.
Alphabet, Visa, PepsiCo, and Verizon did not respond to requests for comment on their bond sales, while Fiserv declined to comment.
Meanwhile, US financial firms have nearly doubled such issuance to approximately 35 billion euros this year, LSEG data shows.
Zurich-based Vontobel Asset Management is among investors purchasing euro bond sales from US companies.
“For investors, it’s also an interesting topic because they can diversify somewhat away from their European core allocations,” said Christian Hantel, head of global corporate bonds at Vontobel.
The wave of euro-denominated issuance from American companies has also increased the US weight in traditional debt indices, making such issuances hard to ignore, Hantel said.
The weight of US corporate issuers in the iShares Core Euro Corporate Bond ETF, a proxy for investment-grade corporate borrowers, rose to nearly 19% by the end of August, from about 18% at the end of 2024, making it the second largest after France, according to Morningstar data.
The reverse Yankee bond sales have been well absorbed by the euro area market and have provided more size, price efficiency, and greater flexibility in the maturity of bonds issuers choose, said Giulio Baratta, global co-head of investment-grade finance at BNP Paribas.
BNP Paribas and Morgan Stanley were involved in a 3.3 billion euro Pfizer bond sale in May, according to a filing by the pharmaceutical firm. BNP was also involved in IBM’s 3.5 billion euro sale earlier this year, Baratta said.
Baratta, who heads BNP’s corporate debt capital markets, noted that US firms have been able to tap debt maturities of up to 20 years in euros, moving beyond the traditional 5-to-12 year range.
This is because expectations that US growth will exceed that of Europe make investors eager to tap debt from American companies, and a weakening dollar enhances the euro’s appeal as a conduit to gain exposure. The euro has risen nearly 14% this year to $1.17, with some analysts anticipating a rise to $1.20.
The euro remains the second-most used currency in international debt markets after the dollar, with a roughly 39% share, according to ING. This, along with central bank reserve holdings and trade invoicing, is being watched for signs of a shift away from the dollar.
“It doesn’t necessarily mean ‘don’t buy US corporates,’ but having the opportunity to diversify away from US dollar assets into euro assets is something investors are looking to do,” said Connor Olvany, a portfolio manager at LG Asset Management’s European Credit team in London.
($1 = 0.8497 euros)
(Reporting by Jaspreet Kalra; additional reporting by Yoruk Bahceli; Editing by Dhara Ranasinghe and Susan Fenton)
