Two EURO Companies Are Paid Interest To Borrow From Investors

If you were told 5 years ago that at some point in the near future that investors would be happy to part with their capital to invest in companies and lend them money and be charged interest for handing over their capital, you would probably say 'that's impossible' and 'that would never happen'.

Well today that idea has become a reality in Europe, where 2 non-financial companies borrowed money from investors and will be receiving interest instead of paying interest to investors.

A German multinational company Henkel AG as well as French company Sanofi SA have both issued debt that carry a negative yield.

Henkel AG has borrowed €500 million for two years issuing bonds that yield negative -0.05%, and Sanofi SA has issued €1 billion in 3 year bonds also yielding -0.05%.

Up until recently investors had only been buying negative yielding Government bonds as Central Banks around the globe had increased their Quantitative Easing (QE) purchases buying back from investors AAA + AA Government bonds. 

However the EU Central Bank ran into a problem with their QE purchases of highly rated Government bonds, the pool of available bonds to purchase was quickly shrinking so the EU Central Bank decided to modify the QE buying of acceptable bonds to include A rated EU corporate bonds to increase the available pool of bonds to purchase.

Because of the expanded EU QE program that has been running since last year, yields on European corporate bonds have been steadily falling where by A + BBB rated bonds are now negative yielding with riskier BB rated corporate bonds about to go negative as well.

For further news on this story see:

 - wsj.com
- Financial Post