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Borrowing to fund contributions, a trend not likely to continue

U.S companies have sold more than $15 billion in bonds since 2016 with the specific purpose of funding their pension liabilities. But the trend is not expected to continue into 2018, as provisions in the Senate and House tax bills look to both eliminate the tax deduction of interest expense over a certain threshold and to temporarily relax levies on domesticating foreign cash. The latter provision will force companies to prioritize their debt issuances based on funding needs, while the former will put more cash in their hands to potentially be used for pension funding.

The average coupon of the bonds issued in in 2017 was 3.8%. Three of 2017’s issues had maturities of more than 30 years, and all but one of the issues were callable.