US regional banks get solid welcome for new bonds

First Republic Bank

18/01/2024 22:34

By Matt Tracy
       Jan 18 (Reuters) - Two major U.S. regional banks raised
a total $4.75 billion selling bonds on Thursday, on the back of
strong demand in a sign that fixed income investors are no
longer jittery about regional banks after the March banking
crisis.    
    Citizens Bank  CFG.N  on Thursday sold $1.25 billion in
six-year senior unsecured callable fixed-to-floating rate notes.
U.S. Bancorp  USB.N , meanwhile, sold $3.5 billion in six-year
and 11-year callable senior unsecured fixed-to-floating rate
notes.
    The banks' deals follow Wednesday's $2.5 billion bond sale
by peer PNC Bank  PNC.N . The sale was met with strong investor
demand and its book received over six times that amount in
orders.
    Market participants expect similarly strong demand for
today's bank deals, in a sign that investors have gotten over
last March's regional banking crisis, where three small-to-mid
size U.S. banks failed over the course of five days.
    "There is very strong demand for credit right now for the
regional banks," said Natalie Trevithick, head of
investment-grade credit strategy at asset manager Payden &
Rygel.
    "It definitely reflects some consensus that we survived the
crisis."
        Both Citizens and U.S. Bancorp's new bonds priced at a
spread that was 27 to 30 basis points inside their initial price
talk levels, reflecting strong investor demand for their notes,
according to Informa Global Markets.
  
    "The market's hot right now," said Dan Krieter, director of
U.S. investment grade strategy at BMO Capital Markets. "Concerns
about March have abated...Those fears are gone now."
    The market should expect similar deals to continue through
the rest of January, according to Krieter, who noted that BMO
has forecast between $50 billion and $55 billion in non-U.S.
Yankee and regional bank issuance by the end of the month.
    The regional banks' decision to tap the bond market during
the holiday-shortened week - like their larger global
systemically important bank (GSIB) peers - comes after their
latest earnings disclosures.
    Bank of America  BAC.N  also tapped the bond market on
Thursday, selling $5 billion in 11-year senior unsecured
fixed-to-floating rate notes. 
    Other GSIBs that issued debt this week include JPMorgan
 JPM.N , Morgan Stanley  MS.N  and Wells Fargo  WFC.N . 

 (Reporting by Matt Tracy
Editing by Marguerita Choy)
 ((Matt.Tracy@thomsonreuters.com;))