Bank of America CorpBorrowed $ 15 billion in the corporate bond market on Friday, breaking the record set a day earlier by one of its biggest financial rivals for the largest bank bond ever sold.
The six-part sale, rated A2, A minus and A plus, attracted orders exceeding the offer, allowing bankers to reverse the amount of spread the bonds will offer investors above the risk-free Treasurys BX: TMUBMUSD10Y
said one person with direct knowledge of the transactions.
Pricing on BofA’s BAC,
The largest $ 4.5 billion bond class due April 2032 is expected to settle at a spread of 110 basis points over the risk-free Treasury bond, lower than initial expectations in the 125 basis point area.
The banking giant said the proceeds would be used for general corporate purposes, in a legal filing. That may include funding the new $ 25 billion share buyback program announced earlier this week alongside the bank reporting a doubling of first-quarter earnings compared to a year earlier. It also released $ 2.7 billion of its reserves, improving net income.
Related: Prepare to buy back shares to roar back
The Dow Jones Industrial Average
DJIA,
and S&P 500 index
SPX,
both closed at new all-time highs on Friday, after a week of tremendous bank earnings giving a positive tone to the US economic recovery.
The sale of Bank of America mega bonds follows on the heels of JPMorgan Chaseis JPM,
A $ 13 billion bond deal on Thursday, which Bloomberg said was the largest of its kind ever from a major lender. It only held that record for a day.
According to CreditSights analysts, major U.S. banks issued a total of $ 39 billion in senior secured debt in the first quarter of 2021, up from $ 63.2 billion in the first three months of 2020.
CreditSights analysts said they expect at least some banks to issue debt to meet regulatory needs this year, after the Federal Reserve chose not to renew an exemption that ended March 31 that would allow banks to issue treasuries during the pandemic. and exclude deposits with the central bank from a calculation of a major capital measure for banks, known as the additional leverage ratio (SLR).
However, Bank of America does not intend to use the proceeds from its new debt offering to offset the SLR change, the person familiar with the transaction said.
CreditSights analysts wrote that Bank of America regulatory capital levels already include “surpluses, so regulatory needs shouldn’t be an issue,” in a note released Friday.