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Companies rush to borrow cheaply

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NEW YORK: Companies around the globe, concerned that heightened tensions between the US and Iran could roil bond markets, are rushing to borrow cheaply while they still can.

Investment-grade firms have sold more than Us$61bil of notes in the US through Thursday, double the same period in 2019. In Europe, investment-rated and junk bond sales including company and country debt

€79bil broke a (Us$88bil) weekly record set a year ago. Borrowers from around the Asia Pacific region sold more than Us$28bil in dollar notes this week, in a record start.

Companies have reasoned that it makes sense to sell bonds now when conditions are still good and demand is strong. If the Iran situation were to worsen and sentiment turn, then borrowers “may end up paying more and demand for riskier assets will wane,” said Alex Eventon, a fund manager at Resco Asset Management.

“No matter what comes next conditions are likely to be less good than they are now,” Eventon said.

The high volume of US investment-grade bond sales this week could translate to slower activity later in January, which is typically one of the busiest months of the year for borrowing.

Wall Street strategist­s broadly expect bluechip companies to sell around 5% fewer dollar-denominate­d bonds this year than last year on a gross basis, as they cut their overall debt levels and take advantage of comparativ­ely lower yields in Europe. And in the near term, many companies are close to posting quarterly results, which limits how much debt they can sell for now anyway.

Some of the major issuers this week in the US included American Tower Corp, a company that leases out space on cellphone towers, which sold Us$1.5bil of notes in two parts. Among issuers from APAC, Westpac Banking Corp and Nomura Holdings Inc led a handful of multi-billion dollar deals, with a large swathe of Chinese companies also selling. In Europe, a flood of bank deals materialis­ed,

€1.25bil including a sale from Italy’s Unicredit SPA.

“Investor demand has been at, or close to, record levels in many instances,” said Lee Cumbes, a managing director in debt capital markets at Barclays Plc in London.

That demand is evident globally. In the US, money managers this week put in orders for far more bonds than companies were selling, and yields on new notes are almost equal to companies’ existing debt, instead of being higher. — Bloomberg

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