JPMorgan, Wells Fargo tap US high-grade bond market

JPMorgan and Wells Fargo are tapping the US high-grade bond market, the first in a likely parade of bond sales from Wall Street’s six biggest banks following their release of first-quarter results. 

JPMorgan is offering bonds in as many as four parts, according to a person with knowledge of the matter. The longest portion of the offering, an 11-year fixed-to-floating rate security that would be callable in 10 years, may yield about 1.4 percentage points above Treasuries, said the person, who asked not to be identified as the details are private.

Wells Fargo is looking to sell bonds in two tranches, a separate person said. The fixed-rate portion of the offering, a four-year security that would be callable in three years, may yield about 1.2 percentage points above Treasuries, the person added.

The two banks are the first of potentially many in the sector to issue debt this month. Financial sector analysts, including at JPMorgan and UBS Group, are predicting anywhere between US$20 billion and US$33 billion from the six biggest banks, extending what’s already a record pace of issuance in the US investment-grade primary market. 

JPMorgan and Wells Fargo released first quarter results on Friday, as did Citigroup. Reporting on Monday was Goldman Sachs Group while Bank of America and Morgan Stanley are due on Tuesday.

Regional and Yankee banks are also expected to sell debt this cycle, padding sales numbers that dealers say could reach US$100 billion this month for the investment-grade market.

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The top lenders issued around US$38 billion in the first quarter to comply with the central bank’s plan to boost their capital, Bloomberg Intelligence senior bank analyst Arnold Kakuda wrote in a note last week.

The primary US investment-grade corporate bond market logged its busiest first quarter on record, super-charged by investors clamoring for high yields before the Federal Reserve starts cutting interest rates. Issuers are looking to take advantage of the tightest risk premiums since 2021. All while avoiding any potential volatility the next few months may bring, including from the US presidential election.

There were three borrowers looking to sell new US high-grade bonds on Monday, according to an informal survey of debt underwriters who declined to name the firms. Weekly volume is projected to be around US$30 billion, with financial institutions likely the main sellers as corporates remain in their respective earnings blackout periods. BLOOMBERG