European "junk" borrowing rates tumble to all-time low The cost of European companies borrowing from the "junk" bond market has fallen to an all-time low, as government bond buying programmes around the world force investors to park their money in riskier asset classes. The yields on sub-investment grade debt fell to 5.5 per cent on Wednesday for the first time, according to the Barclays pan-European high yield index. Yields, which move inversely to prices, fall when the bonds are in higher demand. This comes on the back of aggressive central bank action around the world, most recently from the Bank of Japan announcing that it would double the amount of money in circulation, pushing Japanese investors into riskier assets and overseas. "Economic data may continue to be weak, but faith in the European Central Bank and other central banks remains strong," said Matthew Mish, a credit strategist at UBS. That is causing corporate bond yields to grind tighter. The low yields have prompted a rash of borrowing by sub-investment grade companies. The first quarter saw $38bn worth of high-yield bonds issuance, according to Dealogic, which is the strongest quarter since the financial crisis. The biggest junk bond issue this year came as part of the sale of Virgin Media to Liberty Global for $21.9bn, while Dutch telecoms company KPN and Schaeffler were also able to exploit the low rates to issue bonds worth more than €1bn. But, despite the strong risk appetite, it has still been tough this year for companies based on the periphery of Europe to issue debt. Only the biggest internationally focused companies such as Fiat have been able to complete substantial deals. "All the deals we have seen so far this year have been [from companies that are] quite international," said Luca Falco, the head of Italian debt capital markets at UniCredit. The challenge will be to sell something fully Italian. This week has been strong for other types European debt, with the Italian 10-year sovereign bond yield falling below 4 per cent for the first time in nearly three years. Spanish 10-year bond yields have fallen to 4.2 per cent. "There is just a huge compression of yield as global investors continue to chase corporate credit and credit generally," said Marco Baldini, head of European corporate bond syndicate at Barclays. There is a finite pool of assets that can be invested in, and demand is far outstripping supply.