Henkel, Sanofi take negative-yielding bonds to new frontiers

LONDON, Sept 6 (IFR) - Sanofi and Henkel are poised to become the first non-state owned entities to sell negative-yielding non-financial corporate bonds in euros, as the impact of the ECB’s QE programme shows no signs of loosening.

French pharmaceutical firm Sanofi and German consumer goods producer Henkel are both set to print new deals at yields of -0.05% on Tuesday, on 1bn January 2020 and 500m September 2018 bonds respectively.

Deutsche Bahn sold a 350m five-year deal in July at -0.006%, but some questioned whether it counted as being the first ‘corporate’ issuer to sell negative-yielding debt due to the company being 100% state-owned.

But just two months on and ‘true’ corporate borrowers are now able to match the German railway operator as the universe of negative yielding corporate bonds continues to grow.

Over 27% of euro investment-grade corporate bonds were quoted at a negative yield on September 2, according to Tradeweb. The ECB has now bought more than 20bn in the sector since it started purchases on June 8.

Henkel’s A2/A rated deal will come alongside a euro, sterling and Eurodollar three-tranche tranches, totalling 2.2bn-equivalent.

Sanofi’s three-year will come alongside a 750m-850m six-year and 1-1.15bn benchmark January 2027 deals on Tuesday.


Bankers say some blue-chip corporates are keen to follow these issuers, although the unnecessary carry costs if the financing is not urgently needed, and the risk of such transactions being seen as “ego-driven” are putting some off.

Morgan Stanley analysts said that the economic rationale for buying negative yielding bonds is also “weak”, as the earliest cohort of negative corporate bonds have not seen any spread compression after moving into negative yield territory.

“This universe of investment-grade credit is in effect a quasi rates product and the rationale for keeping these bonds in credit portfolios stems from either mandate/benchmark constraints or a bias to stay with assets directly supported by central bank purchases,” the analysts added.

International companies Engie and Unilever have already sold 0% coupon bond issues with barely positive yields.

Sanofi, rated A1/AA, is expected to price later on Tuesday via BNP Paribas, Morgan Stanley, Credit Agricole, Deutsche Bank, MUFG and Natixis.

Henkel mandated BNP Paribas, Deutsche Bank and JP Morgan to lead Tuesday’s deal. (Reporting By Laura Benitez, editing by Helene Durand and Robert Smith)