Europe's fledgling corporate bond market reached a milestone yesterday when new telecoms giant Tecnost launched the world's largest corporate bond. The €9.45 billion (£7.44 billion) five-year floating-rate note will fund around one-third of the €31.3 billion Olivetti subsidiary Tecnost must pay for Telecom Italia, which it won control of two weeks ago. The bond was central to Olivetti's audacious bid for the much larger privatised utility, which analysts say will provide a template for future European mergers and acquisitions.

"It demonstrates how fundamental a change there has been in investors' risk appetite since the euro was introduced and should inspire other companies to borrow in the bond market," said Mr Gary Jenkins, head of European credit research at Barclays Capital in London.

Tecnost will pay €11.5 per share for its 51.02 per cent stake in Telecom Italia. Around a quarter of that payment (€7.9 billion) will be in the form of bonds issued directly in exchange for Telecom Italia shares, with the remainder a mixture of cash and equity.