Indian dollar-denominated bond sales are set to accelerate in 2017 as mergers and acquisitions and the cheapest borrowing costs in more than two years drive issuance.

That’s a contrast to 2016 when sales of US currency notes by local borrowers fell to a six-year low as higher US interest rates and a slump in the rupee to a record low jolted sentiment. NN Investment Partners expects sales will rebound as companies seek funds for increased M&A, while Citigroup Inc. sees easing rate volatility bolstering issuance. Average spreads on Indian dollar bonds fell to 234 basis points 11 January, the lowest since October 2014, according to JPMorgan Chase & Co. indexes.

“We see dollar issuance in 2017 being more than last year, driven by M&A activity especially from the oil and gas industry,” Wee Lee Cheng, a Singapore-based analyst at NN Investment said in an interview. “Indian bonds’ valuations are about fair but they do offer geographic diversity for investors away from large issuance from China. As long as increases in Fed rates do not result in a risk-off environment, we do expect Indian dollar issuances to continue.”

Mergers and acquisitions in India totaled $81.17 billion last year versus $67.66 billion in 2015, data compiled by Bloomberg show. So far this month, Indian companies have raised $1.1 billion in dollar bonds. Bharat Petroleum Corp.’s Singapore unit issued $600 million of 10-year US currency notes, while Adani Ports & Special Economic Zone Ltd sold $500 million.

Dollar bond sales from local borrowers fell to $8 billion in 2016 versus $8.4 billion in 2015 and $15.1 billion in 2014. That came amid a backdrop of the Federal Reserve’s rate increase in December, the rupee’s slump and India’s demonetization policy in November.

“Issuers that had put their issuance plans on hold and were monitoring the market last year given concerns about change in U.S. leadership and interest rate outlook will now be able to accelerate their bond sale plans,” Neville Fernandes, head of debt capital markets at Citi India, said in an interview. “The rate volatility has subsided and people are taking comfort from the new normal on interest rates.”

Not all companies are looking at dollar funding. NTPC Ltd., Asia’s second-largest power producer by revenues, is seeking euro bonds to fund capital expenditure, said K. Biswal, its director for finance. “We feel we can raise euro funds at cheaper rates than dollar. At this time, it is not advisable to go for dollar bonds.”

“The USD bond market is off to a very strong start this year given the quantum of investor money waiting to be deployed,” said Anuj Singhal, Mumbai-based head for global finance at the Indian unit of Barclays Plc. “For India specifically, the outlook continues to be very positive given the strong underlying macro fundamentals and favorable supply dynamics.”

Bharat Petroleum’s sale was covered almost three times, while Adani Ports’ book was double the issue size.