(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' 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)