The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, June 2 (Reuters Breakingviews) - Wall Street is staging a quiet coup in European capital markets. Excluding banks, U.S. companies are set to issue some 98 billion euros’ worth of investment-grade bonds across the Atlantic by the end of May, a 67% jump from last year and the highest volume in 10 years, according to Bank of America. The lure of lower interest rates is boosting financial tourism, but threatens whipsawing liquidity on either side of the Atlantic as a new consequence of central bank policy shifts.

The “reverse Yankee” trade has exploded in popularity. U.S. issuers now account for nearly 17% of high-rated corporate debt in Europe, triple their share just five years ago, says BofA. Tech giant Apple AAPL.O and mobile carrier T-Mobile TMUS.O are now frequent visitors to Frankfurt, joining a clutch of regular borrowers in both euros and dollars that includes beverage maker Coca-Cola KO.N and industrial giant Eastman Chemical EMN.N.

They’re following an uncomplicated logic. The European Central Bank has cut its target policy rate to 2.25%, far below the still-inflation-scarred Federal Reserve’s effective benchmark of 4.3%. Even accounting for the cost of hedging against currency fluctuations, that’s a big enough gap to make the math work.

Relative pricing is comparable – the surplus interest rate the average corporate borrower might be expected to pay versus government bonds differs by just 5% between the U.S. and Europe. This means that, as the ECB contemplates further cuts while U.S. Treasury yields rise, Europe will look even more attractive, leaving local companies to compete with American giants for investor attention and potentially scrambling pricing expectations.

For local investors in Europe, this promises home-currency access to U.S. titans based in Silicon Valley or Boston. These companies sport some of the world’s most enviable profit margins and balance sheets. Yet they're also less correlated to the European economic and policy cycle, effectively importing U.S. woes from consumer spending pullbacks to the Trump administration’s chaotic edicts.

The phenomenon also drains supply of top-tier IOUs in the U.S. That's perhaps beneficial for CFOs, who can enjoy ravenous demand when they do sell debt back at home. For investors, it means thinner pickings – debt sporting a gold-plated double-A rating in the U.S. currently pays a mere 0.48 percentage point premium over government debt, adjusted for options.

This equilibrium could quickly reverse as interest rates gyrate. U.S. and European monetary policy rarely synchronize; when the two regimes diverge, capital flows can drain liquidity from one market while flooding the other. Aside from on-again, off-again trade wars and the lingering hangover from inflation, central bankers now have another potential headache.

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CONTEXT NEWS

U.S. companies issued 40 billion euros of bonds denominated in the European Union currency from January to April 2025, setting a record pace, according to Bank of America. They are expected to issue 98 billion euros’ worth of bonds during the first five months of the year, up 67% from 2024. For the first time ever, issuance from non-bank borrowers based in the United States is larger than for any Eurozone country.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on PELLEJERO/ Sebastian.Pellejero@thomsonreuters.com))