A few weeks after the UK’s separation from the European Union, UK businesses continue to benefit from the continent’s cheaper borrowing costs.
The less risky UK corporate borrowers raise funds by selling bonds through subsidiaries in Europe. The European Central Bank is collecting many of these bonds as part of its € 1.85 trillion monetary stimulus package, equivalent to $ 2.2 trillion, to support credit markets in the single currency area . Its massive purchases have helped lower borrowing costs for governments and businesses in the region.
In the first two weeks of February, the ECB bought bonds issued by subsidiaries of London-based companies such as oil giant BP PLC, consumer giant Unilever PLC and beer and spirits maker Diageo PLC. , according to weekly central bank deposits. He does not reveal how much he spent on bonds.
The Bank of England and the ECB are both buying corporate bonds to keep credit markets functioning well after the coronavirus pandemic hit the global economy hard. But the BOE purchases a much smaller volume of bonds and imposes more stringent eligibility conditions.
The rates are also lower in Europe. The yield on investment grade corporate bonds in Europe was 0.3% on Friday, compared to 1.7% in the UK, according to the ICE indices.