December 3, 2018 / 1:22 PM / 13 days ago

UPDATE 1-Pool of negative-yielding euro corporate bonds smallest in over 2 years- Tradeweb

(Adds background, detail of negative-yielding bonds, comment)

By Dhara Ranasinghe and Abhinav Ramnarayan

LONDON, Dec 3 (Reuters) - The share of investment-grade euro corporate bonds with negative yields fell last month to its lowest level since at least June 2016, data from Tradeweb showed on Monday, as the effect of monetary stimulus fades and European economic growth slows.

Of the roughly 3.02 trillion euros of euro investment-grade corporate bonds in the Tradeweb system, about 361 million, or 11.94 percent, yielded less than zero at the end of November, Tradeweb said.

That is the lowest since June 2016, when Tradeweb started providing Reuters with data on negative-yielding bonds in the euro area, and less than half the 27 percent share in the same month last year.

“In general, corporate bond spreads have widened in Europe,” said Seamus Mac Gorain, fixed income portfolio manager, JPMorgan Asset Management.

“Among the issues driving that is weaker growth, Italian political noise and the fact that the European Central Bank is bit by bit stepping away from QE (quantitative easing).”

European borrowing costs dropped after the European Central Bank began its 2.6 trillion-euro bond-buying scheme in early 2015. Corporate bond yields in particular shrank even further when they were included in the programme in 2016.

The share of negative-yielding corporate bonds peaked at 31.04 percent in February 2017, according to Tradeweb data.

This meant investors were effectively paying to lend to those companies.

As the end of ECB stimulus nears — quantitative easing is expected to close at the end of this year — those yields are moving higher.

Still, companies such as Deutsche Bahn, Sanofi and Nestle are still recording negative yields on some of their short-dated euro debt.

Deutsche Bahn’s bond maturing in November 2020 , for example, was trading at a yield of minus 0.211 percent on Monday, according to Tradeweb data.

(For an interactive version of the below chart, click here tmsnrt.rs/2RqyBqE.)

Reporting by Dhara Ranasinghe and Abhinav Ramnarayan, graphic by Ritvik Carvalho, editing by Larry King

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