Tags: BNALL | BNK | BNSTAFF | BNTEAMS | BON | BONCURZ4 | BONTOP

Bank of America Plans First Debt Sale Since August

Thursday, 16 Dec 2010 01:15 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Bank of America Corp., the largest U.S. lender by assets, plans to sell 10-year notes in its first benchmark offering of fixed-rate securities since August.

The debt is set to be priced as soon as today and may yield about 255 basis points more than similar-maturity Treasuries, according to a person familiar with the transaction, who declined to be identified because terms aren’t set. Benchmark sales are typically at least $500 million.

After Bank of America sold $1.5 billion of five-year notes on Aug. 17, the Charlotte, North Carolina-based lender has been facing demands from mortgage investors to repurchase almost $13 billion of loans that may have failed to document key data such as income and home values. That helped send the cost to protect Bank of America’s debt relative to the average of the six largest U.S. banks to the most on record at the end of November.

“Since their August issuance, we’ve seen spread tightening within the broader markets, but BofA has run into this mortgage buyback challenge, which is dogging them a little,” said Guy LeBas, chief fixed income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “Yields will probably be a little bit higher than similarly rated institutions because of the credit issues.”

Credit-default swaps on Bank of America, which investors use to hedge against losses on the company’s debt or to speculate on creditworthiness, have jumped 33.8 basis points since Aug. 17, to 182.3 basis points as of 10:54 a.m. in New York, according to data provider CMA. A basis point is 0.01 percentage point.

JPMorgan, Citigroup

The average of contracts on the lender, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley has fallen 10.3 basis points to 134.7, the data show. Credit-default swaps decline as investor confidence improves and rise as it deteriorates.

Bank of America last issued 10-year debt in benchmark size on June 17, selling $3 billion of 5.625 percent notes that priced to yield 248 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The securities traded yesterday at 97.57 cents on the dollar to yield 5.96 percent, or 242.7 basis points spread, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Spreads on A rated banks have declined to 232 basis points, or 2.32 percentage points as of yesterday, compared with 256 basis points on Aug. 17, according to Bank of America Merrill Lynch index data. Bank of America is rated A2 by Moody’s Investors Service and A by Standard & Poor’s.

The last 10-year debt sale by one of the five biggest U.S. banks was a $2.75 billion sale of 4.25 percent notes by JPMorgan Chase on Oct. 14, Bloomberg data show. The debt traded at 94.6 cents on the dollar to yield 4.95 percent, or a 140.2 basis point spread as of 10:37 a.m. in New York, Trace data show.

Bank of America was downgraded today to “market perform” from “outperform” by KBW Inc. because of costs tied to repurchasing faulty mortgages and new rules on debit-card fees.
 

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved