Citigroup, Goldman Sachs Selling Debt
Citigroup Inc. (C) and Goldman Sachs Group Inc. (GS) each sold $1 billion of 10-year bonds on the most active day of corporate debt sales in almost two weeks as spreads for financial firms tightened relative to the rest of the market over the last month.
Planned or completed bond sales of $7.95 billion today would mark the most issuance since Oct. 12, when $9.1 billion of securities were sold. Borrowers are showing renewed confidence in the market as investors wager that European leaders will prevent the region’s sovereign debt crisis from infecting bank balance sheets globally.
The $1 billion Citigroup issue yielded 245 basis points, or 2.45 percentage points, more than comparable Treasuries, while the Goldman Sachs issue paid a 295 basis-point spread, according to Bloomberg data.
Citigroup’s pricing is expensive for investors since the bank’s outstanding 10-year notes trade at spreads of about 250 basis points, James Leonard, a Chicago-based securities analyst at Morningstar Inc., wrote in a note today.
“This is an interesting day with Citi coming out and doing a billion tight to where its old issuance traded, so obviously there is demand in the market,” said Leonard. “I think these banks are trying to get ahead of any potential European problems.”
Canceled Meeting
A meeting of European finance ministers scheduled for tomorrow to decide on bank recapitalization was canceled, the U.K. government and a person familiar with the matter said on condition of anonymity because the discussions are private. That fueled concern the region’s leaders may struggle to resolve the debt crisis at a summit tomorrow.
The outstanding Goldman bonds traded yesterday at a spread of 300 basis points, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. A basis point is 0.01 percentage point.
Investors demanded yields of 3.29 percentage points more than similar-maturity Treasuries to hold Citigroup debt yesterday, compared with 3.75 percentage points at the beginning of the month, according to Bank of America Merrill Lynch index data. Spreads on Goldman Sachs debt tightened by 29 basis points over the same period, while spreads for all U.S. banks decreased 30 basis points. Spreads on U.S. investment-grade companies tightened by 23 basis points, the data show.
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
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