Bloomberg News

JPMorgan Sells 30-Year Bonds With Yields at About Record Low

December 16, 2011

Dec. 15 (Bloomberg) -- JPMorgan Chase & Co. sold $1.25 billion of 30-year bonds as yields on the longest-maturity investment-grade company debt are at about record lows.

The biggest U.S. bank by assets issued 5.4 percent debentures that yield 250 basis points more than similar- maturity Treasuries, according to data compiled by Bloomberg. JPMorgan has raised $4.25 billion by selling 30-year notes, the most among its peers since issuance of the securities by banks resumed in October 2010 after a 15-month pause, Bloomberg data show.

JPMorgan, the most creditworthy of the six biggest U.S. lenders in the eyes of derivatives traders, is taking advantage of yields on investment-grade bonds due in 15 years that average 5.19 percent, after falling from 6.16 percent in February, according to Bank of America Merrill Lynch index data. Banks have sold $323.9 billion of debt in the U.S. this year, with 97 percent coming due within 10 years, Bloomberg data show.

Yields on the long-maturity debt reached a record low of 5.02 percent on Nov. 1.

In its last offering of 30-year bonds, New York-based JPMorgan sold $1.75 billion of 5.6 percent debt that paid 140 basis points, or 1.4 percentage points, more than similar- maturity Treasuries on July 14. The bank issued $1.25 billion of 5.5 percent, 30-year bonds at a 165 basis-point spread on Oct. 14, 2010.

Credit-default swaps on JPMorgan, which investors use to hedge against losses on the company’s debt or to speculate on creditworthiness, fell to 149 basis points yesterday from 182 basis points on Nov. 25, according to data provider CMA. That means investors pay $149,000 a year to protect $10 million of the bank’s debt for five years.

Credit Swap Prices

Contracts on San Francisco-based Wells Fargo & Co. were at 150 while those for Bank of America Corp. reached 407. Swaps on Citigroup Inc. were 276, contracts protecting the debt of Goldman Sachs Group Inc. traded at 322 and those on Morgan Stanley were at 426, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. The contracts, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decline as investor confidence improves and rise as it deteriorates.

For Additional News and Information: JPMorgan Chase debt distribution: JPM US <Equity> DDIS <GO> U.S. bank credit default swaps: GCDS UBAN <GO> Investment-grade debt underwriter rankings: LEAG43 <GO> New issue monitor: NIM3 <GO> Top bond news: TOP BON <GO>

--Editors: Pierre Paulden, John Parry

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.


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