“What’s not said in this release is that there is more potential for increased buybacks for shareholders and acquisitions that might not have taken place if it were not for the cash influx from overseas,” he said.
‘Demand Shock’
Big multinationals still have good reason to bide their time, according to Richard Lane, a senior analyst at Moody’s Investors Service. Because their debt investments are so extensive, companies could end up inflicting losses on themselves with any large-scale selling.
“I don’t think there will be a rush to the door by these companies to sell this debt and causing increasing yields and lower pricing,” said Lane.
Regardless of what happens, what’s clear is that U.S. multinationals will have little incentive going forward to hoard low-yielding Treasuries or investment-grade corporate bonds as a way to avoid the IRS. Under the new tax law, companies that pay relatively low global effective tax rates -- a sign they’re using tax havens -- would pay a minimum U.S. tax.
Even if companies don’t sell outright, there’s going to be a “demand shock,” according to Michael Cloherty, head of U.S. interest-rate strategy at RBC Capital Markets. The longer-term risk is that “the biggest buyer in some of these markets disappears.”
This article was provided by Bloomberg News.