Monetary Lunacy: The ECB Could End Up Funding Bayer’s Purchase Of Monsanto

One month ago, we were surprised to report that the junk bond issued by French telecom company Numericable would, after its 100% upsizing, become the largest high yield bond on record. As we explained this was a direct consequence of the unprecedented intervention by the ECB in the European bond market unveiled one month prior, which courtesy of Mario Draghi’s backstop to all non-financial corporate bond issuance, had made a virtual certainty that the European bond corporate market was the next bubble as there was effectively no longer any risk in holding not only investment grade, but also junk paper, now that starved for yield investors would flood into anything that carried even a modest yield premium.
Today we find an even more striking example of just how broken the global bond market has become thanks to the ECB because as Reuters writes, Bayer could receive financing from none other than the European Central Bank to help fund its takeover of the world’s largest seed company, US-based Monsanto, according to the terms of the ECB’s bond-buying program.
As reported yesterday, Monsanto turned down Bayer’s $62 billion bid on Tuesday, but said it was open to further negotiations. Bayer, which many were surprised by its eagerness to pursue a quasi-hostile offer, promptly agreed to get more actively involved in the negotiation process. Now we know why: the cost of debt would be funded by none other than the European Central Bank.

This post was published at Zero Hedge on 05/25/2016.