Dec. 1 (Bloomberg) -- Bank of America Corp., the biggest U.S. retail bank, sold $9 billion of debt in the largest bank bond sale since the Federal Deposit Insurance Corp. agreed to guarantee the debt.

Citigroup Inc. and Wells Fargo & Co. are also marketing FDIC-backed debt in the second week of bank issuance spurred by the FDIC’s Temporary Liquidity Guarantee Program.

The FDIC on Nov. 21 strengthened the final rules of the program to promise investors timely payment of principal and interest in case of a default, creating a new avenue for banks to refinance their debt. Banks may sell $250 billion to $350 billion of debt with maturities of more than one year under the FDIC program, and a total of $400 billion to $600 billion, including commercial paper and other short-term debt, Barclays Capital analysts estimate.

Bank of America’s sale includes $6.75 billion of 3.125 percent fixed-rate notes due June 15, 2012, $1 billion of two- year notes that float with the three-month London interbank offered rate, $750 million of three-year notes that float with three-month Libor, and $500 million of three-year notes that float with one-month Libor, Bloomberg data show.

The fixed-rate bonds priced to yield 201 basis points more than U.S. Treasuries of similar maturity, Bloomberg data show. The two-year notes pay 50 basis points more than three-month Libor, the three-year notes pay 82 basis points more than three- month Libor, and the three-year notes floating with one-month Libor priced to yield 76 basis points more, the data show. A basis point is 0.01 percentage point.

Goldman Sale

Three-month Libor, a borrowing benchmark, is currently set at 2.22 percent, and one-month Libor is set at 1.91 percent, Bloomberg data show.

Goldman Sachs Group Inc., the biggest U.S. securities firm to convert to a bank, sold $500 million of three-year FDIC-backed notes that float 80 basis points above one-month Libor today, and three-year notes in euros, according to data compiled by Bloomberg. The euro notes priced to yield 45 basis points more than the benchmark midswap rate, Bloomberg data show. Goldman opened the U.S. government-guaranteed bond market last week, selling $5 billion of 3.5-year notes.

New York-based Citigroup plans to sell FDIC-backed notes that will float with three-month Libor, according to a filing today with the U.S. Securities and Exchange Commission.

Wells Fargo, the San Francisco-based bank buying Wachovia Corp., hired Bank of America, Goldman Sachs, Morgan Stanley and UBS AG to help sell the debt, according to an offer document seen by Bloomberg News.

Bank of America’s $9 billion offering is the largest a bank has issued through the FDIC’s program so far. GlaxoSmithKline Plc raised $9 billion of fixed- and floating-rate notes in May in the largest sale of corporate debt this year, Bloomberg data show. Goldman, Morgan Stanley and JPMorgan Chase & Co. sold a combined $17.25 billion of FDIC-backed bonds last week.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

Last Updated: December 1, 2008 17:50 EST