Source: ftalphaville.ft.com - Tuesday, March 31, 2015
While nominal borrowing costs are now much lower in Europe than in the US, that by itself isn’t a good reason for firms that earn money in dollars to start taking out debt in euros. Modest moves in exchange rates can wipe out any perceived benefits from lower interest rates — just imagine what would happen if the euro returned to its level last summer of around $1.4 — and the cost of hedging this currency risk usually means that borrowers are better off staying in local currency. American corporate treasurers know all this, yet are also responsible for more than a fifth of all the euro-denominated investment grade corporate bonds issued in 2015. What gives? Continue reading: Why American companies are borrowing more in euros
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While nominal borrowing costs are now much lower in Europe than in the US, that by itself isn’t a good reason for firms that earn money in dollars to start taking out debt in euros. Modest moves in exchange rates can wipe out any perceived benefits from lower interest rates — just imagine what would happen if the euro returned to its level last summer of around $1.4 — and the cost of hedging this currency risk usually means that borrowers are better off staying in local currency. American corporate treasurers know all this, yet are also responsible for more than a fifth of all the euro-denominated investment grade corporate bonds issued in 2015. What gives? Continue reading: Why American companies are borrowing more in euros
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