Morgan Stanley sells US$8 billion high-grade bonds

Morgan Stanley priced an US$8 billion investment-grade bond sale on Friday (Oct 17), the third such deal by a major Wall Street firm this week following the release of third-quarter results.

The four-part offering’s longest-tenored note, an 11-year bond, yields 0.9 percentage point above Treasuries, a quarter-point less than initial price talk, said a source familiar with the matter who also asked not to be identified as they are not authorised to speak publicly. Proceeds will be used for general corporate purposes, the source added.

A six-year floating-rate note initially included in the offering was dropped during syndication, the source said. Morgan Stanley also scrapped a floating tranche in April, when it announced what was at first a five-part bond sale that ultimately raised US$8 billion, matching the firm’s January issuance. The bank has now sold three US$8 billion four-part bond offerings this year.

Morgan Stanley’s sale follows a US$10 billion bond offering from Goldman Sachs on Tuesday and a US$5 billion deal from JPMorgan Chase on Wednesday. The transactions came after the six biggest US banks reported generally strong third-quarter results.

Still, concerns about regional lenders resurfaced on Thursday after two said that they were victims of fraud tied to loans backing funds that invest in distressed commercial mortgages.

The average yield on US investment-grade bonds fell to a one-year low of 4.69 per cent on Thursday, while spreads stayed near historic lows below 0.8 percentage point, keeping funding costs attractive for higher-rated borrowers.

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Fridays generally do not see high-grade note sales, with just 1 per cent of this year’s supply coming on that day, according to data compiled by Bloomberg. Morgan Stanley’s US$8 billion deal was the only one in the US high-grade primary market on Friday. BLOOMBERG