Poland’s Strong Consumption and Investment Point to Robust Growth with Mild Inflation Outlook
Ukraine Peace Deal Hopes Weigh on EUR Inflation Swaps as Real Rates Hit New Highs
Germany’s Economy: Three Years of Stagnation With Only Limited Signs of Recovery
Commodities Move on Geopolitics and Weather as Oil Rises, Gas Falls, and Nickel Faces Supply Risks
USD Overvaluation Persists as Geopolitics Dominate and JPY Faces Intervention Risks
Foreign tech companies have issued more euro-denominated debt than expected so far in 2025, driven by attractive funding costs in euro markets. This points to European strength. Our expectations for 2025 debt issuance were initially lower as US tech firms can fund their heavy capital expenditure programme from cash flows
The market is well on its way to reaching our forecast of €400bn in EUR corporate supply for 2025. This forecast, which marks an increase in supply compared to FY24, is driven by higher redemptions, capex, M&A activity and technical market factors. We currently stand at year-to-date (YTD) supply of €346bn. Given relatively tight credit spreads, the supply has been well absorbed, and we maintain our FY25 forecast.
Although our supply expectations work out relatively well, the debt issuance by companies in the TMT sector is well ahead of our expectations. We expected similar issuance levels for FY25 as in FY24, because debt redemptions were similar. Also, most companies are not looking to increase leverage. Growing EBITDA and bolt-on M&A drove our expectation of €10bn net supply for FY25. However, we are now looking for a net supply of €39bn, as US-based TMT companies have raised much more debt in euro markets than expected
Normally, euro-denominated TMT debt issuance is driven by European telecom companies. However, this year, US-based companies account for a disproportionate share of total issuance, as can be seen in the table below. While US-based companies accounted for an average of 25% of total euro-denominated TMT issuance in the last five years, their share has risen to 36% this year. As we’ll show below, this remarkable increase is largely driven by favourable funding costs.
The main driver for this supply has been that the European market has been favourable for funding, as market conditions align to offer cost-saving opportunities for US issuers. This year, EUR credit has outperformed USD credit. Our initial assessment is that geopolitical events contributed to this change. The market move indicates that investors have a preference to invest in European corporate bonds. As a result, the USD-EUR credit spread differential has been widening, as shown below.
As the costs to hedge currency risk have been low, as expressed by the cross-currency basis swap, European credit markets continue to offer a cost-saving advantage for US issuers when they come to the EUR market and hedge their FX risk. This is in addition to US issuers also financing their European operations at a lower yield level.
We forecast corporate Reverse Yankee supply to reach up to €85bn in 2025. This will be much higher than the 10-year average issuance volume of €60bn, as well as last year’s €65bn figure. Note that the current YTD Reverse Yankee supply amounts to €63bn. Opportunistic funding will be a large driver for the increase in supply. Additionally, redemptions for Reverse Yankee bonds will rise in 2025 up to €47bn, an increase from the €39bn that matured in 2024.
Our forecast miss for issuance by the TMT sector has been driven by a few jumbo deals by non-traditional issuers in euro debt markets. Notably, among these issuers were quite a few operators of data centres. The Japanese telecom and data centre operator NTT has issued €5.5bn of euro notes, Alphabet (Google) has issued €6.75bn and IBM €2.75bn. These are sizeable amounts, as we initially expected the issuance of €50bn of euro notes by TMT companies in FY25. Note these companies have made sizeable acquisitions in 2025.
IBM announced the acquisition of Hashicorp, Alphabet announced the acquisition of cloud security platform Wiz, and NTT obtained full ownership of its daughter NTT Data Group. A year ago, it was well known that data centres had to fund substantial investments. Nevertheless, our expectation was, and is, that these companies could fund their investments out of operating cash flows. The reason that Alphabet came to the euro market marks a shift in their funding preference and cash management, not so much a change in leverage. In this article, we'll show big tech’s ability to fund its capital expenditures by operating cash flow.
Besides the large technology platforms expanding their hyperscale footprint, there are also pure-play data centres, focusing on co-location and interconnection. Issuance by these operators is not in the statistics of the TMT sector, as they qualify as real estate investment trusts. Although issuance of the two largest pure-play data centres has been lower than the likes of Alphabet, they have also come to the euro market (figure below). So far in 2025, Equinix has raised €2.65bn in euro markets, while Digital Realty Trust has raised €1.7bn. Neither company has raised USD-denominated debt in 2025
Rating agency S&P also acknowledges the strong position of Equinix and Digital Realty Trust in the interconnection market and has recently upgraded the credit ratings of both companies to BBB+. This is in line with the credit rating of telecom operator Orange.
