JPMorgan Chase & Co. has kicked off a significant wave of bond issuance by selling $9 billion in the U.S. investment-grade market. This marks the first major offering from Wall Street’s six largest banks, which are expected to follow suit. The bonds were issued in four segments, with the longest, an 11-year security, yielding 1.07 percentage points (107 basis points) above Treasury rates, down from initial discussions of around 135 basis points, according to a source familiar with the transaction.
This bond sale comes on the heels of JPMorgan reporting record profits, driven by exceptional performance from its investment banking and equities divisions, alongside a multibillion-dollar gain related to a Visa Inc. share exchange. A representative from JPMorgan declined to comment on the bond issuance.
In parallel, Wells Fargo & Co. entered the European debt market with a €2.75 billion ($3 billion) two-part bond offering. Other major banks, including Citigroup Inc. and Goldman Sachs Group Inc., are also considering debt sales following their earnings reports, while Bank of America Corp. and Morgan Stanley are set to release earnings on Tuesday.
Analysts believe that the likelihood of a hard landing for the U.S. economy is low, making bonds from financial institutions attractive. Matt Brill, head of North America investment-grade credit at Invesco Ltd., noted, “While the economy is slowing, it remains strong, and banks are likely to benefit when the Fed begins to cut rates.”
The six largest domestic banks are anticipated to issue between $21 billion and $24 billion in bonds, surpassing the 10-year average of approximately $17 billion for July. Barclays Plc predicts around $30 billion in sales from these banks in the third quarter, with much of this expected to occur this month.
Current market conditions are favorable for bank issuers, with risk premiums on investment-grade bonds narrowing to 89 basis points. The overall cost of selling debt has also dropped to its lowest level in five months.
On the same day as JPMorgan’s issuance, six companies collectively raised $18.1 billion in dollar bonds. The Bank of New York Mellon Corp. and PepsiCo Inc. were among those participating in the bond market, contributing to a broader expectation of as much as $30 billion in new bond sales this week.
