Reverse Yankees on the Rise
May 29, 2025
Following uncertainties in the American markets, fueled by tariffs, growing deficits and Moody’s recent credit downgrade of the United States, large U.S. corporations are increasingly turning to the relative stability of European debt markets this year.1 While it is not uncommon for American companies to issue bonds in the European market, reverse Yankee issuance has seen a 35% increase in issuance to over €83 billion compared to this time last year, as companies look to diversify funding away from the U.S. and frontload issuance needs ahead of any further unknown economic turmoil.2 The U.S. credit market was further challenged following a weak result from the May 21, 2025 Treasury auction, pushing 30-year Treasuries up to as high as 5.1%, as investors signaled their concerns over holding long-term U.S. government debt amid the implications of impending U.S. fiscal policy.3
Given the Federal Reserve’s hesitancy to lower interest rates while the European Central Bank cut rates to 2.25% in April,4 borrowing in the European market has become attractive to U.S. companies. During the month of April, the cost of borrowing in the U.S. was approximately 2% higher than in Europe.5 International companies are also able to use euro-denominated issuance as a hedge against currency fluctuations during these periods of rapid changes in exchange rates.
The U.S. credit market has long been a place of stability and confidence for investors, both in the U.S. and the rest of the world. However, as the passing of President Trump’s “One Big Beautiful Bill Act” looms — set to increase the debt ceiling by $4 trillion — treasury yields climb and volatility in the dollar rises, companies are looking elsewhere in the world to find lower cost debt in a steadier environment.6 Aside from the $4 trillion increase to the debt ceiling, the bill is also reportedly set to expand the U.S. government’s deficit by approximately $500-600 billion per year through 2034.7 As companies seek market and political stability elsewhere and the American share of the euro market increases, it is also likely that U.S. political decisions will begin to have greater impacts on the euro bond market than previously.
Key Takeaway
The U.S., once the economic safe harbor of the world, is seeing weakening demand and supply shifting to international markets, with reverse Yankee deals accounting for over 30% of euro issuance this year, more than 10% above normal figures.8 At least for the time being, some companies are seeking more predictable alternatives to the U.S. credit market volatility, as investors push back against the uncertainty of economic and fiscal policy. As always, we remain focused on our disciplined investment process and long-term approach.
Sources:
1-3, 5-7Bloomberg
4,8Financial Times – Reverse Yankee’ deals hit record as US companies flock to euro debt market; 5/14/25
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