Photo: Flickr / peasap
Unilever, the large European food conglomerate, just sold $550 million worth of 5-year notes with a coupon of just 0.85 per cent.According to Bloomberg, this is the lowest ever borrowing cost for U.S. debt.
To put this into perspective, the U.S. government is borrowing money for 5 years with a coupon of 0.5 per cent.
This is part of a major trend throughout the world of rock-bottom yields for anything that’s not a European peripheral or a junk corporate borrower.
And just like that, Texas Instrument has broken a record for the lowest coupon on 3-year debt at just 0.45 per cent according to Bloomberg.
For a little more perspective, here’s a chart, via Fred, of average yield on Aaa Moody’s rated bonds.
You can see that yields have been collapsing just like with government debt.
That being said, it’s worth noting that as cheap as corporate borrowing costs are getting, spreads to Treasuries (i.e. the price they pay above risk-free rates) are not that narrow by historical standards.
Here’s a chart of the AAA-spread to Treasuries: