As NATO leaders huddled in The Hague in late June to iron out a plan to radically boost military spending, bankers in London were busy adding up the investor orders for a bond being offered by a little-known Czech maker of armored vehicles and ammunition.
The final tally: More than $10 billion for a sale that wasn’t even supposed to total $1 billion. Thrilled, they quickly doubled the size to more than $2 billion and slashed the interest rates they were offering. Just a few days earlier, the description "explosives maker” next to one Spanish company lining up to sell junk bonds caused a mini-frenzy. The company, Maxam Prill, markets itself as a supplier to the mining industry but investors locked in on the possible military uses for the devices as they piled into the $1.4 billion sale.
There are few investing booms in the world right now that are bigger than the rush to tap into Europe’s military buildup. And while the stock market, with its wild 100% and 200% rallies in defense companies, may get the headlines, it is the credit markets that will provide most of the cash that Europe’s manufacturers need to ramp up production and fulfill the trillions of euros worth of orders that pour in from governments for tanks, bombs and guns.
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