US Companies Embrace Euro Financing: A Strategic Shift
US firms are increasingly turning to euro loans, as borrowing costs in Europe are significantly lower than in the USA.
This is reported by Bloomberg.
In the early months of 2025, they issued euro bonds worth €23.4 billion ($24.3 billion), setting a record since 2007. Major borrowers include T-Mobile US Inc. and IBM, along with leading Wall Street banks.
The primary driver of this trend is the difference in key interest rates set by central banks. The European Central Bank's (ECB) deposit rate is 175 basis points lower than the Federal Reserve's (Fed) rate in the US. This allows companies to save on borrowing costs, especially if they do not need to convert their debt into dollars.
Last year, American corporations issued €108 billion in bonds in Europe, the highest in five years. However, demand is even higher in 2025 as businesses try to anticipate the effects of Donald Trump’s policies.
The ECB is expected to lower rates three more times this year (currently at 2.75%), while the Fed is likely to do so only once (currently at 4.5%).
The disparity in rates is attributed to concerns about the economic situation in Europe and increased protectionism in the US.
Last week, IBM issued bonds worth €3.5 billion and subsequently raised another $4.75 billion in the US, totaling nine tranches. The coupon rate for the five-year euro bonds was 2.9%, while the equivalent dollar debt had a rate of 4.8%.
T-Mobile USA issued €2.75 billion in bonds in three parts last week. According to Bloomberg, the seven-year debt helped the company save about nine basis points on swaps, while other tranches were priced similarly to what T-Mobile would have raised in the US.
Reminder:
The European Union is preparing to implement corresponding measures in response to the 25% tariffs imposed by the US on steel and aluminum imports.
