J.P. Morgan Chase sold $13 billion of bonds, the largest deal ever by a bank, taking advantage of some of the cheapest borrowing costs in years to boost its capital after the Federal Reserve let pandemic relief measures lapse.
The deal, which followed the bank's best quarter ever, hit the market as corporate borrowers continue to see heavy demand for debt that provides a decent premium over Treasuries. Order books grew to about $26 billion, allowing J.P. Morgan to trim the interest on the debt from the relatively high spreads it initially offered, according to a person with knowledge of the matter.
Thursday's jumbo offering may have been related to recent changes in regulatory relief for banks, according to Bloomberg Intelligence analyst Arnold Kakuda.
Treasuries liquidity disappeared in March 2020. In response, the Fed told banks they didn't have to factor in Treasuries or deposits when calculating their supplementary leverage ratios, which tells them how much capital to set aside to back up their holdings. That exemption went away two weeks ago.
Banks were left in the position of needing to sell Treasuries or add capital, and J.P. Morgan's sale of unsecured debt will help it meet total loss-absorbing capacity, or TLAC, requirements, and put the ratio back in balance, Mr. Kakuda said.