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Note: New non-financial high grade corporate bond deals in US dollars will drop by 12% to $500bn next year, driven by higher borrowing costs and excess cash on corporate balance sheets, Moody's said this week.
"The primary market will be less active next year as policy rates may creep up and corporates choose to rely on their savings rather than increase their borrowings," said Moody's economist Ben Garber.
Falling interest rates, tightening credit spreads, the recovering global economy and surging inflows of cash into corporate bond funds have triggered a rally in corporate bonds since the summer. According to Merrill Lynch indices, returns on investment grade and high yield notes are around 18% this year, compared with a 7% loss in 2008.
In 2009, there will be a total $570bn of non-financial investment grade corporate issuance, including Yankee deals, Garber predicted. He said that firms next year will issue primarily to pre-finance upcoming maturities or restructure their existing debt , as seen this year.
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