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Updated January 19th, 2024 at 07:57 IST

New bonds from US regional banks receive strong investor response

Citizens Bank sold $1.25 billion in six-year senior unsecured callable fixed-to-floating rate notes on Thursday.

Business Desk
New bonds
New bonds | Image:Freepik
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New bonds in focus: US regional banks received a positive reception for new bonds, collectively raising $4.75 billion on Thursday. 

The strong demand signals a shift in investor sentiment, indicating increased confidence in regional banks following the banking crisis in March.

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Citizens Bank sold $1.25 billion in six-year senior unsecured callable fixed-to-floating rate notes on Thursday. 

Concurrently, US Bancorp completed a bond sale, raising $3.5 billion through six-year and 11-year callable senior unsecured fixed-to-floating rate notes. These transactions come on the heels of PNC Bank's $2.5 billion bond sale on Wednesday, which garnered robust investor demand, with orders exceeding six times the offered amount. 

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The overall market anticipates continued strong demand for upcoming bank deals, reflecting investors' recovery from the regional banking crisis of last March, during which three small-to-midsize US banks failed within five days.

Natalie Trevithick, Head of Investment-Grade Credit Strategy at asset manager Payden & Rygel, noted, "There is very strong demand for credit right now for the regional banks," stressing a consensus that the industry has successfully weathered the crisis.

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Both Citizens and US Bancorp priced their new bonds at a spread 27 to 30 basis points inside their initial price talk levels, showcasing robust investor demand. 

According to Informa Global Markets, the favourable pricing indicates a hot market, and concerns related to the March events have diminished.

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Dan Krieter, Director of US Investment Grade Strategy at BMO Capital Markets, commented on the positive market sentiment, stating, "The market's hot right now. 

Concerns about March have abated...Those fears are gone now." Krieter expects similar deals to continue throughout January, with BMO forecasting between $50 billion and $55 billion in non-US Yankee and regional bank issuance by month-end.

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Bank of America also participated in the bond market on Thursday, successfully selling $5 billion in 11-year senior unsecured fixed-to-floating rate notes. 

Other global systemically important banks (GSIBs) that issued debt this week include JPMorgan, Morgan Stanley, and Wells Fargo.

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(With Reuters Inputs)

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Published January 19th, 2024 at 07:57 IST

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