High-Grade Issuers to Sell $120 Billion of Debt in January Spree

(Bloomberg) -- Companies are lining up debt sales to the tune of $120 billion in January, a 9% increase from last year, 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 Thursday following investor meetings earlier this 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 U.S. 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 $78 billion in U.S. high-grade corporate bonds coming due or that may be called in January, according to data compiled by Bloomberg.

In 2019, just over $1.1 trillion of investment-grade corporate debt was sold in the U.S. Wall Street research groups think that the total in 2020 will fall by as much as 5% to 8%. 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.

Read more: U.S. corporate bond sales to slow in 2020 with speed bumps ahead

Investment grade has returned a whopping 14.7% this year, among the best gains in U.S. 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 $15.5 billion six-part deal and Fox Corporation’s $6.8 billion M&A transaction.

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