Truist Financial Corp. has successfully priced a bond offering of $1.75 billion, driven by strong demand, according to a source in the bond market. The notes, maturing on October 30, 2029, were priced at approximately 225 basis points over the 5-year Treasury yield of about 4.9%. The initial price talk was around 255 basis points, but the spread tightened, indicating a healthy appetite for the debt. The offering received approximately $8 billion in orders, exemplifying robust demand.
Investors have demonstrated increasing interest in Truist bonds over the past 10 days. This surge in demand has resulted in tighter or flattened spreads on existing Truist debt, showcasing stability ahead of the new bond issuance.
Truist has been proactive in raising capital and issuing debt since its formation in December 2019, following the merger of BB&T and SunTrust Banks. With plans to issue debt three to four times a year, previous offerings have ranged from $500 million to $1.75 billion per tranche.
On the day of the bond offering, Truist’s stock rose by 0.8%, reflecting positive market sentiment.
This latest bond offering is in line with banks’ efforts to raise funds to meet proposed increases in capital requirements by the U.S. Federal Reserve and to build up reserves in anticipation of a potential economic downturn in 2024.
Banks Boost Debt Issuance Following Quarterly Earnings
In recent weeks, several banks have increased their debt issuance following the release of their quarterly earnings. Truist, one of the leading financial institutions, has joined this trend by issuing a substantial amount of corporate bonds. This move follows similar actions by other major banks, including U.S. Bancorp, Goldman Sachs Group Inc., and BNY Mellon Corp. In fact, data from BofA Global Research shows that Goldman Sachs issued around $4 billion in debt, while BNY Mellon Corp. issued $2 billion in bonds on October 18.
Furthermore, PNC Financial Services Group Inc. raised an impressive $3.5 billion in corporate debt on October 17. Wells Fargo & Co. and JPMorgan Chase & Co. also took advantage of the favorable market conditions, issuing $6 billion and $7.25 billion in corporate bonds respectively on October 16.
The robust demand for Truist bonds demonstrates the positive sentiment surrounding debt issuance, which has been relatively weak throughout 2022 and a significant portion of 2023. Moody’s Corp. Chief Executive, Robert Scott Fauber, acknowledged that debt issuance has been below normal levels. However, he believes that this could indicate a potential increase in issuance demand in the near future. During the company’s third-quarter conference call with analysts, Fauber noted that overall corporate debt velocity remains considerably lower than historical averages.
In July, Bloomberg conducted an analysis of JPMorgan data, which estimated that the combined bond issuance of the six largest banks in the U.S. was expected to reach approximately $30 billion following their respective earnings reports.
Joy Wiltermuth contributed to this report.
