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U.S. banks are expected to dominate corporate bond issuance after several major players reported results on Friday and early next week, according to investors and bond analysts.
January is historically the busiest month for bank bond issuance compared to the rest of the year. The six major banks issued an average of $22.58 billion in bonds over the past seven months as of January, according to data from Informa Global Markets.
“Bank issuance is likely to be the main driver of primary volume in the second half of this week and throughout next week as the sector turns profits and the issuance window opens for them,” said Blair Shwedo, head of fixed income sales and trading at the U.S. bank.
On Friday, a long list of global systemically important banks (GSIBs), including Bank of America, BNY Mellon, Citigroup, JPMorgan and Wells Fargo, will report their fourth-quarter results. Goldman Sachs and Morgan Stanley will report their results the following Wednesday.
Much of the debt is expected to come from these large U.S. banks trying to get ahead of regulatory capital reserve requirements.
“Size certainly varies, but for GSIBs it’s typically in the $5 billion range per issue,” said Guy LeBas, chief fixed income strategist at asset manager Janney Montgomery Scott.
“And January is usually the most important month of the year,” he added.
The expected strong issuance from banks this week and next follows a lackluster January 2023, in which just $9 billion was raised by the “big six” banks, according to data from Informa Global Markets. Only two members of this group decided to enter the market at this time: Bank of America raised $3 billion, while Morgan Stanley sold $6 billion in bonds.
The forecast for significant bank debt sales this week and next follows a strong start to the year in the primary investment grade bond market.
Last week, total premium primary issuance volume was $57.9 billion, above the high end of market forecasts. The largest issuance was UBS Group’s $4 billion two-part senior note offering.
Twelve issues are expected to hit the market on Monday, according to IFR data, as issuers anticipate the release of key economic data, including the December consumer price inflation report due out on THURSDAY. (Reporting by Matt Tracy, Editing by Tomasz Janowski)
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