Business World

Wednesday 21 August 2019

Lending to McDonald’s would cost euro bond investors

Stock photo: PA
Stock photo: PA

Molly Smith

Fast food giant McDonald’s Corp may boast about how juicy its burgers are, but it can hardly say the same about some of its bond yields.

Investors would now pay to lend euro to the American chain, as post-crisis monetary policy has kept interest rates at or near all-time lows.

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With the European Central Bank ready to add more stimulus to the eurozone, the already-record pile of $13.3trn (€11.9trn) of negative-yielding debt is poised to grow even further, sweeping some US issuers in the European market along with it.

Euro-denominated debt issued from McDonald’s with a 4pc coupon is now yielding -0.174pc, data compiled by Bloomberg shows.

Its 2pc euro bonds due in 2023 yield -0.148pc.

McDonald’s is hardly alone in this phenomenon, however, as easy money policies have driven European yields below zero in other US company bonds too, including some from Apple Inc, PepsiCo, AT&T and International Business Machines Corp, to name a few.

Of the $13.3trn of negative-yielding corporate and sovereign debt as tracked by Bloomberg, $245bn is from the US and Canada.

The US companies’ dollar-denominated debt still offers yields in positive territory, where American interest rates – though likely to fall – are still much higher than in Europe.

While these companies are investment-grade rated and already offer less yield than their junk-rated counterparts, some high-yield companies also have bonds that trade with negative yields, such as Altice France SA, Telecom Italia and Nidda Healthcare Holding (Stada).


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