European companies are taking advantage of the growing appetite for risk by flooding the corporate bond market with issues pitched at smaller investors.
With banks less willing to lend capital, large corporations have started to look beyond their traditional pool of institutional investors and are selling bonds in denominations as small as €1,000 ($1,390).
There has been a month-on-month increase in the number of such issuances.
Almost all buyers of smaller lots have been retail investors. Institutional investors typically buy bonds in lot sizes of €50,000 and above.
Companies such as Unilever and Volkswagen have tapped this growing market in the past few months as investors have turned to purchasing corporate debt in favour of equities and government bonds.
In May, European companies issued 382 bonds tailored for the retail investor market, 20 per cent more than in the previous month and way above the 218 issued in January, according to data from Xtrakter.
Analysts say investors are attracted to these issues not just for the high yields on offer but because they feel their capital will be protected by companies whose names they know and trust.
Wayne Hiley, a director on the London syndicate team at Barclays Capital, said: “A big shift is that corporate bonds, whether brought through a fund or directly, have become a key asset class alongside equities, property and government securities.
“We are seeing two-way flow from the retail account base, but it is hugely skewed towards the buy side. Most retail investors seem to be in this for the medium term at least.”
This week, Eni, the Italian energy group, began offering €1bn of bonds aimed at the retail investor market, which it said could be increased to €2bn depending on demand.
EDF, the French electricity group, is today due to launch a €1bn bond pitched at retail investors, the first of its kind for EDF in almost two decades.
Alessandro Bernini, chief financial officer of Eni, said: “We have already successfully placed two bonds into the institutional investor market, so this is partly about diversifying our funding.
“However, we know from a high number of banks that there is a lot of interest out there for this kind of product.”
Get alerts on European banks when a new story is published