Morgan Stanley sells $6.75 billion of debt amid bond rush
Morgan Stanley raked in $29 billion in orders for the high-grade deal
Washington: Morgan Stanley added to the recent wave of bank bond sales in the US investment-grade market on Wednesday, a sign that issuance is still going strong as lenders emerge from earnings blackout periods.
The bank sold $6.75 billion of debt in a four-part deal, according to a person familiar with the matter, who asked not to be identified as the details are private. The longest dated portion of the sale, an 11-year note that can’t be called for 10 years, yields 1.67 percentage points over Treasuries after initial pricing discussions in the area of 1.85 percentage points, said the person.
Morgan Stanley’s bond sale is the latest in a deluge of transactions from banks that have reported quarterly earnings. This reporting season has seen JPMorgan Chase & Co. sell a $4.5 billion dual-tranche deal, while Wells Fargo & Co. priced $1.725 billion of perpetual notes Monday followed by a jumbo $8.5 billion two-tranche trade on Tuesday, the bank’s largest self-led offering on record.
If this week’s bank deals are any indication, investors are hungry for more financial issuance. Morgan Stanley raked in $29 billion in orders for the high-grade deal, according to Bloomberg’s Brian Smith. Meanwhile, JPMorgan’s bond offering on Monday saw a peak book of $17 billion and Wells Fargo’s on Tuesday saw demand of more than $21 billion. Goldman Sachs Group, Citigroup and Bank of America may still add to the bond issuance spree.
Morgan Stanley didn’t respond to a request for comment.
The recent flood of bank sales suggests that the second-half of 2023 could be poised for an issuance rebound, as financial companies look to meet new regulations requiring lenders to have greater so-called total loss absorbing capacity. As such, some lenders may need to start tapping debt markets in order to have more securities that can help absorb losses in times of trouble.
Issuance from financial companies - usually some of the biggest sellers of corporate debt in the US - has been sluggish so far this year, after lenders front-loaded borrowing needs in 2022, in part to get ahead of the Federal Reserve’s interest-rate hikes.
Prior to Wednesday, the banking sector sold $303 billion of bonds in 2023, representing about 41 per cent of investment-grade volume, according to data compiled by Bloomberg. That compares to about $394 billion sold and 53 per cent of investment-grade volume in the same period a year earlier.