Goldman Sachs Group Inc. (GS) and Citigroup Inc. each sold $1 billion each of ten year bonds as investors become convinced that bank's balance sheets will not be affected by the European sovereign debt crisis.
Bond sales of $7.95 billion are expected to be completed today, the most since October 12th when $12.5 billion were issued. Spreads for financial firms tightened compared to the rest of the market over the last month as the market enjoyed its most active day of corporate debt sales in two weeks.
Morningstar Inc. analyst James Leonard explained the heightened actiivity: "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. I think these banks are trying to get ahead of any potential European problems."
Bloomberg data shows that Goldman Sachs issue yielded more than similar Treasury securities, paying a 295 basis-point spread while Citigroups issue, which also did better than Treasury securities yielded 2.45 percentage points. Leonard said Citi's outstanding 10 year notes trade at about 250 basis points, so their prices are expensive for investors.
