American companies will become even bigger buyers of bonds soldby their peers as negative interest rates worldwide intensify pressure on them todeploy their $4 trillion cash pile, according to Citigroup Inc.
|“In their search for yield, companies are likely to increase their allocation toward one- to five-year corporatebonds rated A or higher,” said Ajay Khorana, global head ofCitigroup's financial strategy and solutions group.
|During the past two years companies have purchased as much as 15percent of all new A-rated corporate bonds with a maturity of oneto five years, according to Khorana. That's more than pensionfunds, banks, or insurance companies, as treasurers search forplaces to invest record amounts of cash at a time when yields areevaporating on safer investments such as Treasuries.
|“This pressure will be acutely felt by many U.S. multinationalswho, for tax reasons, keep large cash balances invested inshort-term securities through their overseas subsidiaries,”Citigroup bankers led by Khorana wrote in a report published by thebanks financial strategy and solutions group.
|Investment-grade companies in the U.S. have sold $302 billion ofbonds in 2016 after issuing a record $1.3 trillion of debt in allof 2015, according to data compiled by Bloomberg.
|Companies will also look to buy more sovereign and supranationaldebt, Khorana said.
|Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.
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