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Wall Street’s biggest banks are poised to embark on a bond sales spree following their second-quarter earnings reports, capitalizing on declining yields and preempting potential market disruptions from the upcoming US presidential election. JPMorgan credit analyst Kabir Caprihan predicts that the top six US banks could borrow between $21 billion to $24 billion in July, surpassing the historical average of $17 billion. This surge in issuance is expected to be a key driver of spreads and a primary focus for investors as earnings season unfolds.

JPMorgan (JPM), Citi (C), and Wells Fargo (WFC) will kick off earnings on Friday, followed by Goldman Sachs (GS) on Monday and Bank of America (BAC) and Morgan Stanley (MS) on Tuesday. Analysts forecast a second consecutive quarterly decline in net interest income after last year’s record surge. The recent dip in yields, fueled by signs of cooling inflation, provides an advantageous environment for these banks, which are major issuers of investment-grade corporate debt. Financial companies’ bonds account for about a third of the US investment-grade market.

Market Overview:

• Top six US banks could borrow $21 billion to $24 billion in July.


• JPMorgan, Citi, and Wells Fargo to kick off earnings on Friday.


• Recent yield decline provides favorable backdrop for bond issuance.

Key Points:

• Net interest income expected to drop for the second consecutive quarter.


• Big banks face $50 billion in redemption calls and maturities in H2 2024.


• Barclays forecasts $30 billion in new senior debt issuance in Q3.

Looking Ahead:

• New capital rules under Basel III Endgame to drive further bond issuance.


• Strong demand for bank bonds expected from investors.


• Voya Investment Management plans to add Big Six bank debt to its portfolio.

Big banks face approximately $50 billion in redemption calls and maturities in the second half of 2024. Barclays (BCS) analysts, including Peter Troisi, anticipate that this will be replaced with new senior debt, with around $30 billion expected to be issued in the third quarter, most of it in July. Bank of America and Goldman Sachs, having been less active earlier this year, are expected to be significant issuers in the latter half. Barclays forecasts $15 billion in borrowing from these two banks and another $25 billion from regional lenders and trust and credit-card banks for the remainder of the year.

The impending new capital rules under Basel III Endgame are likely to necessitate increased debt at the holding-company level, further driving bond issuance. Bloomberg Intelligence analyst Arnold Kakuda projects $20 billion to $25 billion in bank bond issuance this month. Investors, including foreign firms and US pension plans, are expected to meet this borrowing spree with robust demand. Voya Investment Management, for instance, plans to add bank debt to its portfolio, especially from the Big Six, as spreads in the broader investment-grade market remain attractive.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.