BofA Sells $3.25 Billion of Bonds After Strong Earnings Report

(Bloomberg) — Bank of America Corp. tapped the U.S. investment-grade bond market Friday with a $3.25 billion self-led deal, joining Morgan Stanley in issuing new debt following a better-than-expected earnings report.

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The bank sold 11-year fixed-to-floating-rate notes to yield 1 percentage point above Treasuries, after initial price discussions in the area of 1.15 percentage points, according to a person familiar with the matter. The proceeds are earmarked for general corporate purposes.

BofA on Thursday beat analysts’ earnings estimates as fees climbed at the company’s dealmaking unit, boosted by a record-breaking period for mergers and acquisitions.

Blowout results from the big U.S. banks may spur even more bond issuance from the financial sector, with borrowing costs still attractive even as some market rates rise. Benchmark 10-year Treasury yields reached the highest since mid-year this week. The bond deal comes as risk premiums in corporate debt remain low, increasing the appeal to issuers.

Morgan Stanley on Thursday took advantage of favorable sales conditions to price $5 billion of debt in a deal that performed well and priced at a level tighter than initially discussed.

JPMorgan Chase & Co. and Citigroup Inc. are also candidates to sell debt before year-end, Bloomberg Intelligence’s Arnold Kakuda said Thursday, as large U.S. banks look to boost their cash holdings to support ballooning balance sheets.

“I wouldn’t be surprised to see JPMorgan issue senior debt and they can also do sub or preferred notes,” Kakuda said. “Citi may do one bond deal until year end while Bank of America may start slowing down going forward. Wells Fargo will probably not issue the rest of the year.”

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(Updates to include final pricing information.)