ECB Cash May Stymie Bond Sales

Banks’ issuance of unsecured euro debt has fallen.

The European Central Bank may be making it harder for the region’s banks to revive bond sales by giving them access to unlimited cheap cash.

Issuance of senior unsecured euro debt by banks fell about 35 percent to 51.4 billion euros ($67 billion) in the six months ended Feb. 6 from the same period a year earlier, data compiled by Bloomberg show. The average relative yield on the debt is 307 basis points, up from about 200 before the region’s sovereign debt crisis worsened in June, according to Bank of America Merrill Lynch’s EUR Corporates, Banking index.

Taxpayer Bailouts

Governments racing to adjust the rules to favor depositors and reduce or eliminate the role of taxpayers in bailing out distressed lenders aren’t helping. The changes will lower potential recoveries for unsecured creditors in a default, probably to zero, according to Glionna at Barclays Capital.

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