It wasn't so long ago that airliners and real estate companies were asking for emergency support and precautionary bank loans. Now investors are desperate to lend them money.
Bonds of EasyJet and U.K. property manager Hammerson are among the best performers in Europe this year. Investment-grade companies in the two sectors have sold almost $22 billion of debt in euros and sterling, the fastest pace of year-to-date issuance since at least 2010.
Money managers are betting that vaccine rollouts in the U.K. and U.S. will allow a return to normal life by the summer, even as much of Europe suffers under a third wave of the pandemic. Notes of the virus-battered companies also offer good value after central bank bond-buying pushed down corporate yields.
"Fundamentally there is a very good reason investors are getting behind these stories," said Andreas Michalitsianos, a portfolio manager at J.P. Morgan Asset Management, which oversees $2.3 trillion. "In most cases, they aren't going to default, they aren't going to become high yield and their business models aren't fundamentally broken."
Mr. Michalitsianos is looking to buy up laggards with the hope that they will keep closing the gap with the broader market. Yields on Easyjet's 2025 notes are more than 100 basis points higher than the index. Bonds of real estate firm Kennedy-Wilson Holdings and bus operator FirstGroup also trade at a premium despite a rally this year.
Others warn that the optimism is unsustainable as a successful vaccine rollout doesn't necessarily equate to the return of pre-pandemic work and travel habits.