Midsize Banks Sell Bonds Again While Big Banks Keep Waiting

Two mid-sized financial companies are selling debt in the corporate bond market Wednesday, the first bond sales from U.S. financials since Standard & Poor's downgraded the U.S. credit rating on Aug. 5.

The issues may indicate that mid-sized and smaller financial companies are ready to return to the bond market after bank bonds took a beating in the downgrade's aftermath last week.

Chicago trust bank Northern Trust Corp. (NTRS) had a $500 million offering of 10-year senior unsecured notes Wednesday, and Western Union Co. (WU), an Englewood, Colo., payment-services company, had a $400 million offering of seven-year senior notes Wednesday.

In August so far, there has been only one debt sale from a major U.S. bank--a $1.25 billion deal from J.P. Morgan Chase & Co. (JPM) on Aug. 3, two days before the downgrade.

Bond issuance from financials dried up in the week after the downgrade, and bank bond spreads over Treasurys widened by as much as 57 basis points that same week, according to Barclays data. Financial spreads stabilized on Tuesday and opened five basis points tighter Wednesday morning.

"After seeing a week of incredible volatility and coming into the market today with spreads tightening, this is a signal to banks that now might be a better time to enter the market than later," said Jody Lurie, corporate credit analyst at Janney Capital Markets. Lurie added that high-quality credit is increasingly attractive to investors looking to diversify away from U.S. Treasurys.

Still, analysts say the biggest U.S. banks may not be ready to issue new debt until September. Concerns linger over U.S. exposure to euro-zone debt contagion, even though the European Central Bank has alleviated some fears by starting to buy Italian and Spanish debt. Investor panic over the health of French banks last Thursday sent U.S. bank spreads to their widest level this year.

"The downgrade was the straw that broke the camel's back," said Anthony Valeri, a senior vice president at LPL Financial. "At the heart of this, it was about Europe."

Uncertainty over mortgage litigation and regulatory reform at big banks also has kept bond issuance at bay this month.

Non-financial issuers have jumped back into the primary investment-grade market with enthusiasm this week. Nearly $12 billion in investment-grade debt was sold Monday and Tuesday, and eight new deals were announced Wednesday morning, which could push supply to close to $20 billion by the end of the week.

"Financials are definitely the most uncertain at this point, and what investors seek out are diversified, global, non-financial companies," Lurie said.

Prominent deals from blue-chip companies this week include a $5 billion offering from AT&T Inc. (T) on Monday, the largest high-grade corporate debt offering in the U.S. since May 25. Walt Disney Co. (DIS) also had its biggest debt offering in 15 years on Wednesday with a $1.85 billion deal.

ow borrowing costs remain attractive for new issuers. Walt Disney's offering Wednesday was sold with record-low coupons for five-, 10- and 30-year bonds, toppling previous lows set in 2010 by Colgate-Palmolive Co. (CL) and Johnson & Johnson (JNJ).

Borrowers are tapping the market at a time of improved investor sentiment toward bonds. The Markit CDX North America Investment Grade Index, a barometer of U.S. corporate credit risk, was recently quoted 2% lower at 110.32, down from 112.52 at the end of the day Monday. A decline in the index suggests higher investor confidence in the bond market. In the most volatile trading days last week, the index hovered around 116.

-By Nicole Hong, Dow Jones Newswires; 212-416-3760; nicole.hong@dowjones.com

Western Union (NYSE:WU)
과거 데이터 주식 차트
부터 9월(9) 2024 으로 10월(10) 2024