Top US Banks Slash Bond Sales, a Bright Spot for Investors

The six biggest Wall Street banks are expected to slash their corporate bond issuance in 2023 for a second year in a row, offering a bright spot for investors nursing record losses from the debt last year.

The biggest US banks could sell a total of $20 billion to $25 billion across currencies this month after they post earnings, according to Bloomberg Intelligence’s Arnold Kakuda and Nicholas Beckwith. That would be about a 15% drop from last year, he wrote. And their full year sales may fall 33% to $132 billion, the strategists wrote.

Banks front-loaded their funding last year before borrowing costs skyrocketed and they have smaller refinancing needs coming up and lower share buybacks, contributing to the slowdown in issuance, according to Barclays Plc. The banks are also largely done funding the massive growth of assets they experienced at the height of the pandemic.

JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. post results on Friday, freeing them up to offer new bonds. Goldman Sachs Group Inc. and Morgan Stanley are expected to post results on Jan. 17.

Investors will be less interested in seeing how robust profits were in the final three months of last year and more focused on signs the nation’s biggest banks are girding for a major downturn as rate increases crimp economic activity, equity analysts said.

The top banks will probably be active in the new issue market to partly offset upcoming maturities, but the pace “should ebb from last year’s gusher,” according to Baylor Lancaster-Samuel, vice president of fixed income at Amerant Investments Inc. Almost half of the $56 billion of bonds maturing this year from the six big banks comes due in the first quarter of 2023, with the remaining $29 billion evenly spread across second quarter to fourth quarter, according to Barclays.