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Companies lining up to raise US$120b in debts in January

New York

COMPANIES are lining up debt sales to the tune of US$120 billion in January, a 9 per cent increase from 2019, according to an informal survey of dealers.

Several leftovers from December - such as JD.com Inc and Reinsurance Group of America Inc - could sell debt soon after markets reopen on Thursday following investor meetings earlier last month. Companies may look at current low funding costs and bring deals on an opportunistic basis, or seek to replace bonds that are scheduled to mature.

The high-grade bond spread, the added premium over US Treasuries investors get paid to hold riskier debt, has fallen to 94 basis points, the tightest level since Feb 26, 2018. Meanwhile, there is about US$78 billion in US high-grade corporate bonds coming due or that may be called in January, according to data compiled by Bloomberg.

In 2019, just over US$1.1 trillion of investment-grade corporate debt was sold in the US. Wall Street research groups think that the total in 2020 will fall by as much as 5 per cent to 8 per cent. January and February supply may, however, rise as issuers look to get ahead of the risk associated with the Democratic presidential primaries, including Super Tuesday voting, in March.

Investment grade has returned a whopping 14.7 per cent this year, among the best gains in US fixed income. Strategists say that even coming close to that in 2020 will be a tall order.

Volume is typically skewed to supply from financial companies in January. However, the split between corporate issuers and financial companies was largely even in 2019, driven by Anheuser-Busch InBev SA's US$15.5 billion six-part deal and Fox Corporation's US$6.8 billion M&A transaction. BLOOMBERG