Goldman Sells $2.5 Billion of 30-Year Bonds, First Offering in Three Years

Goldman Sachs Group Inc. sold $2.5 billion of 30-year debt in its first sale of the securities in more than three years, as investors accept the lowest premiums since April for bank bonds with similar credit grades.

The 6.25 percent notes from the fifth-biggest U.S. bank by assets pay 170 basis points, or 1.7 percentage points, more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The bank sold the debt after reporting on Jan. 19 that earnings dropped 52 percent as a slowdown in trading and investment banking reduced revenue more than analysts estimated. Relative yields for banks ranked A by Standard & Poor’s, such as New York-based Goldman Sachs’s, have still tumbled from last year’s high of 305 basis points in June to 214 basis points as of yesterday, Bank of America Merrill Lynch index data show.

“As far as U.S. banks go, the sentiment really is that they do have a lot of liquidity on their balance sheets, but rates continue to be quite low,” said Rajeev Sharma, a money manager at First Investors Management in New York who helps oversee $1.5 billion of investment-grade credit.

The spreads on bank bonds graded A are at the lowest since the level was 208 basis points on April 23, Bank of America Merrill Lynch index data show. Spreads on overall A rated corporate notes were at 159 basis points yesterday.

‘Looking for Spread’

“With A rated debt, the sentiment continues to be you’re looking for spread, and a lot of the bank paper continually has more spread than industrial paper,” Sharma said. “It makes it very attractive if you compare it to a regular industrial out there.”

Goldman Sachs may use proceeds for general corporate purposes with the debt rated A1 by Moody’s Investors Service and A by Standard & Poor’s, according to a person familiar with the offering who declined to be identified, citing lack of authorization to speak publicly about the transaction.

The bank last issued 30-year U.S. dollar bonds in benchmark size in September 2007, according to data compiled by Bloomberg. In that offering, the bank sold $2.5 billion of 6.75 percent debt due in October 2037 at a spread of 190 basis points more than similar-maturity Treasuries, Bloomberg data show. Benchmark sales are typically at least $500 million.

The transaction is also the first benchmark offering of 30- year debt by a U.S. bank since October, when JPMorgan Chase & Co. sold $1.25 billion of 30-year bonds in October, according to data compiled by Bloomberg.

JPMorgan, the second-biggest U.S. bank by assets, issued 5.5 percent debt maturing in October 2040 in that offering at a spread of 165 basis points, Bloomberg data show.

Goldman Sachs sold $1.3 billion of 50-year debt on Oct. 26, Bloomberg data show. The bonds were offered in $25 denominations and can’t be called, or redeemed, for five years, the bank said in a regulatory filing.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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