Europe’s capital markets are making a great leap forward 

By Marcus Ashworth

THERE’S BEEN a lot of bad weather this year, both actual and economic. Tariffs are coming and going, are making software-company investors panic, and the US is rattling a saber in the Gulf. But none of this is spoiling the springtime vibe in Europe’s credit markets.

Take this week. After a few days of President Donald Trump making the world even more confused about his tariffs and his goals in Iran, the continent’s unflustered corporate-debt buyers were back in business. On Tuesday, 14 different investment-grade and junk-rated companies borrowed money in Europe, illustrating that the market is open to a wide variety of credits with different risks and maturities.

US tech “hyperscalers” — firms such as Alphabet, Inc. who are spending wildly on building data centers — have continued to gatecrash the euro, sterling, and Swiss franc corporate bond markets to become an outsized presence.

That dynamic is here to stay, according to Bloomberg Intelligence (BI) credit strategists. Last year, a record €143 billion ($169 billion) of investment-grade euro corporate bonds were issued as “reverse Yankees” — market lingo for US borrowers issuing in euros. That was a quarter of all the supply in the common currency, and BI expects that share to rise in 2026.

Other profound changes are at play, too. Whereas US corporate borrowers would once have swapped the proceeds from their foreign bond sales back into dollars, they’ve started holding onto the debt in European currencies. Ostensibly this is to fund local operations, but there’s an element of hedging exposure to the greenback at a time of huge policy uncertainty at the White House.

The European Central Bank has been slow to react. But it’s now taking the opportunity to for international investors by offering access to euro funding to central banks around the world. This can be tapped in times of stress, and it promotes global use of the single currency.

Much of the US share of European borrowing comes, of course, from big banks and multinationals with extensive overseas operations. That has helped drive the supply of new corporate and financial bonds denominated in euros as much as 15% higher at the start of this year than in the same period in 2025.

Investment-grade corporate debt is doubly attractive because it has become less volatile than apparently “risk free” government bonds. Persistent overborrowing by countries takes the shine off their debt when comparing it with corporate borrowers with healthier balance sheets (even if their credit ratings are usually lower than a sovereign issuer’s). Credit investing also offers plenty of diversification in terms of different industries and risk profiles.

Even marquee junk-rated US corporates such as Ford Motor Co. are freely borrowing in euros, although American issuers make up much less of the euro high-yield debt market than they did a decade ago.

It helps that yields on euro-denominated corporate debt are on average about 170 basis points lower than for comparable US bonds, making this a cheaper way for American companies to borrow. In exchange, euro investors get access to tech giants with better credit ratings. And the yields are still attractive when you consider this is increasingly single-A and double-A debt, often with longer maturities.

Euro credit markets also look less exposed to the impact of artificial intelligence on legacy software companies. While such businesses account for a large part of lending by US private-capital funds, European junk-rated companies tend to do more boring stuff such as telecoms and manufacturing.

Yields have risen somewhat for European- and UK-listed software providers with outstanding corporate bonds, but after an initial jolt the damage has been relatively contained.

More broadly, euro credit markets are becoming globally important as a conduit for raising plentiful, relatively cheap money for international corporates. Some of this may ebb over time if US interest rates drop and the cost of American corporate debt follows. And yet the depth of Europe’s debt capital markets is undoubtedly improving — something that the continent has been desperate to achieve. Call it de-dollarization if you will. It’s more likely just progress.

BLOOMBERG OPINION