Thursday, JPMorgan Chase Co. sold$ 13 billion of bonds, the largest deal ever by a bank, taking advantage of some of the cheapest borrowing costs in years to boost its capital after the Federal Reserve let pandemic relief measures lapse.
The deal, which followed the best quarter ever produced on the market, hit corporate borrowers as they continue to see a decent demand for debt that offers a high premium over Treasuries. Order books grew to about$ 26 billion, allowing JPMorgan to reduce the interest on debt from the initially relatively high spreads it offered, according to a person with knowledge of the matter.
According to Bloomberg Intelligence analyst Arnold Kakuda, the jumbo offer may have been linked to recent changes in regulatory relief for banks.
In March 2020, the Fed asked banks to not have to factor in Treasuries or deposits when calculating their supplementary leverage ratios, which tells them how much capital they need to reserve to back up their holdings. This exemption went away two weeks ago; banks were left in the position of needing to sell Treasuries or add capital, and JPMorgan's sale of unsecured debt will help it meet total loss-absorbing capacity, or TLAC, requirements, and restore the ratio back in balance, said Kakuda. The bank signaled Wednesday that it would manage SLR and we will, told Chief Financial Officer Jennifer Piepszak analysts on a quarterly earnings call.
The company declined to comment further on Thursday; Including today's sale, Bloomberg has raised$ 22 billion in the U.S. dollar investment grade bond market this year, more than any other major U.S. bank, according to data compiled by JPMorgan.
Banks are always going to be hefty issuers, which lends a certain opportunism to tapping the markets, especially when funding is still so cheap, said Jesse Rosenthal, a senior analyst at CreditSights. According to the person who asked not to be identified about a private transaction, the longest part of the five-part offering, a 31 year security, will yield 107 basis points above Treasuries. The sale follows strong first-quarter earnings, including a 15% increase in fixed-income, currency and commodity trading revenue and a$ 5.2 billion release from its credit reserves.
Rival JPMorgan also sold bonds Thursday.
The previous largest bond sale of a bank came from Goldman Sachs Group Inc., a$ 10 billion offering in April 2020, according to Bloomberg data show.
JPMorgan is the general bookrunner of the sale, and the proceeds are marked for sole corporate purposes. For more articles like this, please visit bloomberg.com. Subscribe now to stay ahead with the most trusted business news source in the world.