Magazine article American Banker

Global Markets Seen Bonding with the Euro

Magazine article American Banker

Global Markets Seen Bonding with the Euro

Article excerpt

The global bond market has embraced the euro.

Though the currency won't be introduced into circulation until January, it has been the third-most-popular currency in worldwide debt issuance in 1998.

With 11.5% of the world's bonds denominated in the European currency unit this year, it ranks just behind the U.S. dollar and German mark in terms of popularity - and just ahead of the British pound and French franc.

By all accounts, the pace of issuance in euros is expected to pick up this fall.

"I see a heavy calendar in euro issuance in September," said Felicity Buchan, a vice president on J.P. Morgan's debt syndicate desk in London.

"European investors are really looking at the core European market much more, and looking at the differences in absolute yield on bonds," Ms. Buchan said. Right now, euro-denominated bonds have a marginally higher yield than bonds denominated in francs or marks, Ms. Buchan said.

The European currency unit, which will become the euro in January, is currently evaluated using a basket of currencies including the 11 that will convert to the euro this winter, plus the British pound and Greek drachma, which will not. The European currency unit usually has an exchange rate close to the U.S. dollar.

Bond issuers in euros are not limited to governments and corporations in the 11 participating nations. The government of Argentina has been one of the largest issuers, having raised $5 billion from euro-denominated bonds this year.

A broad international investor base exists for the euro. Investors in the United States, Japan, and all the continental European countries other than the Netherlands are buying euro-denominated bonds, Ms. Buchan said.

She said the other Asian countries still tend to favor the mark, and the Dutch are leery because the pound and the drachma won't be included in the conversion, despite being part of current European currency unit calculations. …

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