Morgan Stanley and Bank of America Issue $9 Billion in Bonds Following Earnings Reports

On Tuesday, Morgan Stanley and Bank of America Corp. were the first of the big six Wall Street banks to announce bond sales. They combined to sell $9 billion of new bonds, as the market prepares for the usual deluge of debt from US lenders following their earnings reports.

Morgan Stanley is selling $6 billion of new debt in three parts, according to a person familiar with the matter. The longest portion of the sale, a 15-year note, will yield 2.43 percentage points over Treasuries, after initial pricing talks expected 2.7 percentage points, said the person. This is a private matter, so the person asked not to be identified.

Bank of America is selling a $3 billion security, according to a person familiar with the matter. The four-year fixed-to-floating rate note will yield 1.2 percentage points above Treasuries, after initial pricing talks said the person, who asked not to be identified as the details are private.

Both banks are expected to use the proceeds from the sale of their four-year floating-rate tranches for general corporate purposes.

Morgan Stanley's net income fell by almost 40% compared to the previous year, due to lower revenue and higher than expected non-interest expenses. However, the bank's overall results were better than what analysts had predicted.

Bank of America reported earnings on Friday, along with Wells Fargo & Co., Citigroup Inc., and JPMorgan Chase & Co. Goldman Sachs Group Inc. and Morgan Stanley each announced results on Tuesday. The bank's traders beat analysts' estimates as they reaped the benefits of dramatic market swings, and lending income rose along with interest rates while falling short of expectations.

Bank of America reported strong results in its fixed income, commodities and currencies trading segment, with revenue up 49%. Executives attributed the strong performance to investments in the business, which benefited from higher rates, inflation and volatility.

Now that all six banks have reported earnings, their issuance is expected to make up the majority of the week’s new investment-grade deals. According to Bloomberg Intelligence analyst Arnold Kakuda, syndicate desks indicate they could sell a combined $20 billion to $25 billion of debt across multiple currencies in January, which would be a potential 15% drop compared to the prior year. Kakuda wrote in a note dated Jan. 10 that bank debt issuance is expected to fall to a “more normalized pre-pandemic pace.”