(Bloomberg) – JPMorgan Chase & Co. sold $ 13 billion worth of bonds on Thursday, the largest transaction ever by a bank, and used the cheapest borrowing costs in years to increase its capital after the Federal Reserve dropped the pandemic relief.
The deal, which followed the bank’s best quarter ever, hit the market as corporate lenders still have a large demand for debt that yields a reasonable premium over the treasury. According to a person with knowledge of the matter, JPMorgan increased the interest on the debt of the relatively high spreads it initially offered to about $ 26 billion.
According to Bloomberg Intelligence analyst Arnold Kakuda, the jumbo offer may be related to recent changes in regulatory relief for banks.
The liquidity of the treasury disappeared in March 2020. In response, the Fed has told banks that they do not have to calculate treasury or deposits when calculating their supplementary leverage ratios, which tells them how much capital needs to be set aside to back up their shares. This release disappeared two weeks ago.
Banks have been left in a position to sell treasuries or add capital, and JPMorgan’s sale of unsecured debt will help meet the requirements of the total loss-absorbing capacity, or TLAC, and rebalance the relationship, said Kakuda.
The bank announced on Wednesday that it would do something. “We have levers to manage SLR, and we will do so,” CFO Jennifer Piepszak told analysts during a quarterly earnings call. The company declined to comment further Thursday.
JPMorgan, which is included today, has raised $ 22 billion in the U.S. investment grade market for investment grade, more than any other major U.S. bank, according to data compiled by Bloomberg.
“Banks will always be solid issuers, offering a certain opportunity to leverage the markets, especially if financing is still so cheap,” said Jesse Rosenthal, senior analyst at CreditSights.
According to the person, who asked not to be identified and is discussing a private transaction, the longest part of the five-part offer, a 31-year security, will yield 107 basis points above the treasury. Sales follow strong earnings in the first quarter, including a 15% increase in fixed income, foreign exchange and commodity trading revenues and a release of $ 5.2 billion from its credit reserves. The competitor Goldman Sachs Group Inc. also sold bonds Thursday.
The data compiled by Bloomberg also comes from JPMorgan, a $ 10 billion offer made in April 2020. JPMorgan is the sole book winner of the sale, and the proceeds are marked for general corporate purposes.
For more articles like this, please visit us at bloomberg.com
Sign up now to stay ahead of the most trusted business news source.
© 2021 Bloomberg LP