Berkshire Hathaway Plans 3 Billion Euro Bond Sale

(RTTNews) - Warren Buffett's Berkshire Hathaway is reportedly planning its first ever European bond sale of 3 billion euros to take advantage of low interest rates in the region, traversing a path taken by a range of home companies in search of cheap funding options.

Berkshire's move comes at a time when the European Central Bank's bond-buying stimulus program of 60 billion euros a month is imminent. The expanded asset purchase program would last at least until September 2016.

Companies need funds for business development, including acquisitions, and the bond markets are seen as ideal means to access finance.

Berkshire has reportedly hired Bank of America Corp, Deutsche Bank AG, Goldman Sachs Group Inc and Wells Fargo & Co. for a possible sale of the euro-denominated bonds, expected in the near future.

Buffett is known to be conservative about the European bond market, but his changed perspective also seems to indicate the need for cheap funds that may possibly be used for acquisitions.

The average yield on investment-grade corporate bonds is now 0.90 percent, according to Bank of America Merrill Lynch index data.

Other American companies too have taken the euro-denominated bond route, with Kellogg and Whirlpool also selling such bonds.

Euro bond sales by Coca-Cola Co and Mondelez International Inc has lifted total issuance by American businesses to 14.6 billion euros last week; until this year, U.S. borrowers have had raised 28 billion euros, according to Bloomberg.

But its not only international companies that benefit from cheap European funds. There is a symbiotic relationship, given that European investors, bereft of gainful yields on many European government bonds, vie for other modes of returns.

Demand for corporate bond only pushes down yields, only making it more cheaper for businesses to borrow.