*

Maple bond issuance reaches $16.32 billion, surpassing

2024

total

*

Cheaper borrowing costs attract global companies to

Canadian

market

*

US trade policies drive demand for non-dollar assets,

analysts

say

By Matt Tracy, Nivedita Balu and Davide Barbuscia

Sept 29 (Reuters) - Global companies including Citigroup ( C/PN )

and McDonald's have flocked to Canada's bond

market this year, drawn by strong investor appetite and cheaper

borrowing costs, according to LSEG data, analysts and investors.

The trend also reflects a growing willingness among issuers and

investors to shift away from the dollar as uncertainty created

by U.S. President Trump's trade policies lingers.

Issuance of "Maple bonds" by foreign borrowers in the

Canadian market reached $16.32 billion as of September 25,

outstripping the $13 billion for all of 2024 and edging past the

$16.28 billion raised in 2023, according to LSEG data.

That jump is partly due to cheaper borrowing costs, said Andrew

Parker, co-head of the National Capital Markets Practice at law

firm McCarthy Tetrault.

"There was just one deal after another this summer. ...

Rates in Canada have been more attractive," added Parker, who

worked on NextEra Energy Capital Holdings' ( NEE/PU ) C$2 billion

($1.44 billion) Maple bond, one of the largest this year.

While the Federal Reserve resumed cutting U.S. interest rates

only this month, the Bank of Canada has eased policy more

aggressively.

The January inclusion of Maple bonds in the FTSE Russell

Index has also helped drive investor demand, said Rob Brown,

managing director and co-head of Canadian Debt Capital Markets,

RBC Capital Markets.

U.S. companies are also lining up to borrow in euros, with bond

sales hitting a record $100 billion so far this year, Reuters

reported this month.

Mike Goosay, chief investment officer and global head of fixed

income at Principal Asset Management, said companies were likely

responding to growing investor demand for non-dollar assets as

the impact of Trump's sweeping tariffs on the U.S. economy

remains unclear.

"That could create enough noise that investors are going to

demand products issued in other markets," Goosay said.

Citi and insurers New York Life and Pacific Life were

also among the biggest bond issuers in Canada this year.

The companies did not respond to requests for comment.

RISK OF US SPREADS WIDENING

Demand for U.S. corporate debt has also been strong, pushing

spreads on high-grade bonds - the premium over U.S. Treasuries

companies pay to investors - near all-time tight levels in

recent weeks. This month's Fed rate cut is expected to boost the

market further.

Still, the market may be underestimating potential long-term

risks, investors said. Those include an expected widening of the

U.S. deficit, which could boost long-term yields, volatility

caused by Trump's whipsawing trade policies, and the

politicization of institutions such as the Fed and Bureau of

Labor Statistics (BLS).

Corporate

debt issuance dried up

and spreads widened sharply in the aftermath of

Trump's April 2 announcement

of steep tariffs on U.S. imports, before retreating in

recent months.

"Broad-based tariffs and the politicizing of core U.S.

financial and economic institutions such as the Fed and BLS are

causing angst among foreign investors when considering how much

exposure to USD assets is appropriate," said Zachary Griffiths,

head of investment grade credit strategy at market research firm

CreditSights.

($1 = 1.3935 Canadian dollars)