Morgan Stanley Issues $8 Bn In Bank Bonds Following Revenue Surge

Morgan Stanley is making a foray into the US investment grade bond market with an USD 8 billion offering, hot on the heels of reporting stronger than expected revenue. This move mirrors actions by rivals JPMorgan Chase & Co. and Wells Fargo & Co., who have also tapped into the market this week.

The longest portion of Morgan Stanley's four part offering, an 11 years security, is expected to yield 1.25 per cent points above treasuries. This figure is down from initial discussions of around 1.45 per cent points, according to a source familiar with the matter. The proceeds from this issuance will be directed towards general corporate purposes, as per the same source, who preferred to remain anonymous due to the confidentiality of the details.

JPMorgan recently issued the same four types of notes as those being marketed by Morgan Stanley. Their sale successfully raised USD 9 billion, marking the start of what is anticipated to be a series of bond issuances from major American banks following the release of their first-quarter results.

Morgan Stanley's revenue in its trading and wealth units surpassed analysts' estimates, echoing the strong earnings performance seen in peer firm Goldman Sachs Group Inc. CreditSights analysts Peter Simon and Iris Shi expressed interest in Morgan Stanley's 11 years note offering, particularly if spreads remain favorable. However, they indicated a preference for the same bond issued by Morgan Stanley in January if spreads fall below a certain threshold.

The analysts also noted relative valuation comparisons among major banks, highlighting better valuation opportunities among some money center banks, particularly Citigroup and Bank of America, when compared to Morgan Stanley relative to Goldman Sachs, given recent spread levels.