Wells Fargo & Co., the most creditworthy of the six biggest U.S. banks based on derivatives trading, sold $2.5 billion of debt at almost half the relative yield that rival JPMorgan Chase & Co. paid last month.
The biggest U.S. bank by market value, in its eighth offering in the past 12 months, issued 3.5 percent, 10-year notes that pay 150 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. JPMorgan sold $3 billion of 4.5 percent notes, also due in 10 years, at a 270 basis-point spread in January, the data show. It sold an additional $250 million of the debt later that month.
Wells Fargo, the largest U.S. home lender, is taking advantage of record-low borrowing costs for investment-grade companies, an extra boost after it escaped a review by Moody’s Investors Service to consider downgrades for JPMorgan, Morgan Stanley, Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp. Credit-default swaps on the San Francisco-based bank have diverged from competitors in the past month.
JPMorgan’s 4.5 percent notes traded at 105.4 cents on the dollar to yield 3.8 percent at 11:54 a.m. in New York, or a spread of 178 basis points, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Yields on investment-grade debt reached a record low of 3.42 percent on Feb. 28 before rising to 3.44 percent yesterday, according to Bank of America Merrill Lynch index data.
Wells Fargo last sold 10-year debt in March 2011, issuing $2.5 billion of 4.6 percent notes at 130 basis points more than similar-maturity Treasuries, data compiled by Bloomberg show.
Credit-default swaps on Wells Fargo declined to 92.7 basis points yesterday, the lowest since July, while the average for the five other banks fell to 228.3 basis points, according to data provider CMA. Swaps on JPMorgan declined to 108.3. The contracts typically rise as investor confidence worsens and fall as it improves.
Default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Wells Fargo sold $1.25 billion of floating-rate, five-year notes on Feb. 22, and issued $2 billion of 1.25 percent, three-year notes on Feb. 8, Bloomberg data show. In the past year, the lender has issued at least $9.25 billion of corporate debt.