J.P. Morgan and Morgan Stanley charged into the US dollar bond market Tuesday, taking advantage of strong conditions to front-load issuance to meet Total Loss Absorbing Capacity needs. Morgan Stanley sold a US$3bn three-year non-call two floating rate bond at IPTs of L+80bp area, which a banker close to the deal said was based on reverse inquiry from investors.
A broker said investors had already placed US$750m in reverse orders before the new issue was announced. J.P. Morgan opted for the longer end, selling a US$2bn 31-year non-call 30 deal at T+120bp, 10bp inside IPTs. If not called, the deal switches to a floating coupon of L+158bp.
Both deals were self-led. "Financials have relatively large funding requirements due to the new regulatory regime," said a syndicate banker. "Because of that, they're going to be more frequent issuers." Regional lender PNC Bank was also in the market with a US$1bn five-year senior deal which priced at T+68bp, inside IPTs of T+85bp area.
All three deals follow a US$3bn trade from Goldman Sachs on Monday, which was a tap of the US$5bn issue it sold after reporting earnings in January. Morgan Stanley also sold a US$7bn deal in January, while J.P. Morgan placed a US$2.75bn deal the same month. Average high-grade bank spreads closed at 119bp on Friday, just 1bp tighter than where they started the year, according to Bank of America Merrill Lynch data. But market participants remain upbeat on the sector despite modest tightening on the back of heavy supply.
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