According to the Smart Finance APP, Wall Street banks are expected to launch a series of bond sales next week to take advantage of ultra-low credit spreads and strong investor demand. After announcing quarterly performance on Friday, the six largest banks in the USA may borrow between $20 billion and $24 billion, exceeding the usual $15 billion raised in October over the past decade. Despite an increase in bank borrowing this year, bond issuance has returned to normal since the Federal Reserve stopped raising interest rates last year and began cutting rates.

Analysts expect banks to take advantage of borrowing costs close to 20-year lows to complete sales of at least $15 billion to $20 billion. Banks typically issue bonds after announcing quarterly performance, and large banks as the largest borrowers in the US investment-grade bond market are proactively addressing potential volatility around the November US elections.

In a research report on Monday, Kabir Caprihan, a credit analyst at JPMorgan, pointed out that the six largest banks in the United States may borrow a large amount of money after announcing their quarterly earnings. According to Bloomberg data, Caprihan said that this amount surpasses what they typically raise in October, and so far this year, these banks have borrowed about $107 billion at the senior holding company level. Despite increases in borrowing, bond issuance has returned to normal levels since the Federal Reserve stopped raising interest rates last year and began cutting them.

Nicholas Elfner, Co-Head of Research at Breckinridge Capital Advisors, believes that it is reasonable for banks to issue new bonds after profit announcements and before elections, and he expects supply to normalize in the next few quarters. Large banks always need new capital to support lending, and as the largest borrowers in the U.S. investment-grade bond market, they are known for their savvy borrowing timing.

Bloomberg Intelligence analyst Arnold Kakuda stated that these banks are taking advantage of borrowing costs near 20-year lows, as strong investor demand is expected. It is anticipated that the 'six major banks' will complete sales of at least $15 billion to $20 billion. Banks may have a strategic advantage in issuing bonds above this level to meet the huge demand for corporate bonds from bond investors.

It is understood that banks usually issue bonds after announcing quarterly performance. $JPMorgan (JPM.US)$and $Wells Fargo & Co (WFC.US)$will announce quarterly performance on Friday, and $Bank of America (BAC.US)$Please use your Futubull account to access the feature.$Citigroup (C.US)$ and $Goldman Sachs (GS.US)$ Will announce performance next Tuesday, $Morgan Stanley (MS.US)$ while planning to announce on next Wednesday.

Moody's Ratings expects that trading revenue for large banks in the third quarter will be strong, and investment banking business will also improve compared to the same period last year, partly due to an increase in corporate debt and stock issuance.

Currently, all eyes will be on the forecast of full-year net interest income, which is an indicator of the difference between the interest banks charge on loans and the interest they pay to depositors. This is the traditional bank's biggest source of income, so any hints about what they can achieve in 2025, especially with the Fed expected to continue cutting interest rates, will be very important.

Despite some credit issues facing the entire banking industry, especially smaller banks with commercial real estate business, Standard & Poor's analysts wrote in a report on September 27 that the outlook for most banks is stable, and regulatory tightening since the regional crisis has had a positive impact on crediting.

In addition to the bank bonds expected to be issued this month, Caprihan of JPMorgan forecasts that from November to January next year, there will be $30 billion to $40 billion of new bank bonds entering the market.

Samuel Wilson, portfolio manager at Voya Investment Management, said the company will be one of the investors looking to make a purchase. He believes that in a market where corporate bond spreads are so narrow, bank stocks are a rare bright spot, and investors must look for opportunities worth taking risks with meager returns.

According to Bloomberg index data, as of the Wednesday close, the average U.S. investment-grade spread was 82 basis points, the narrowest level since September 2021. Wilson said: "In a tense market situation, this is still a trade we like."

Editor/Somer