Citigroup on Friday broke an eight-week drought of issuance by the US''s largest global banks, coming to market with a blow-out US $750m tap of its outstanding 10-year on-the-run notes. Spurred by a surge in bond prices on the back of better than expected news out of the EU summit, Citi jumped in with a US $500m tap of its US $1.25bn 4.5 percent 2022s at initial price thoughts of 260bp, versus a 253bp bid, 245bp offered level on Thursday.
It quickly grew that to US $750m after being deluged with more than US $4bn of demand, according to one investor, as market participants scrambled to cover neutral and short positions put on the high beta bank sector ahead of the EU summit. The deal was priced at 250bp at a time when outstandings had tightened in the morning to 245bp bid, 240bp offered, indicating a new issue concession of about 5bp. Goldman Sachs did a private tap of its US $250m 2022s earlier last week, but it wasn''t offered to the market and was sold privately to a handful of European investors.
In spite of the relatively small concession for a bank, investors thought the pricing was attractive, given the strong bid for banks as people piled into the highest beta sector now that the EU has given an idea of its near-term flight plan. "The summit caught people off side," said David Knutson, senior bank analyst at Legal & General Investment Management America. "I think people were neutral to short bank risk, as the expectations for the summit were low." Citi might be the only US bank able to immediately take advantage of the sudden turnaround in market sentiment.
The week ahead is a shortened July 4 holiday week, and then banks go into earnings blackout before announcing second quarter results later in July. Friday''s deal was the first by Citigroup since late February, when it issued a US $500m five-year floater and a US $1.25bn 2.65 percent three-year fixed rate note. The last offering by one of the US banks that provides global investment banking services was by Goldman Sachs in April, when it issued US $2bn of 3.3 percent three-year notes.
Wells Fargo came to market on June 20 with a US $750m three-year floater and US $2bn of 1.5 percent three-year fixed-rate notes, but it was set apart from the rest of its peers by the fact that its lack of a global platform kept it off Moody''s blacklist for downgrades, dealt out a fortnight ago. The dearth of bank deals over the last two months was taken advantage of by other financial institution group issuers earlier this week, with deals from AIG, Met Life and GECC.
Comments
Comments are closed.