Magazine article American Banker

'Tis the Season for Banks to Avoid Debt Markets

Magazine article American Banker

'Tis the Season for Banks to Avoid Debt Markets

Article excerpt

'Tis the Season for Banks To Avoid Debt Markets

Banks gearing up to issue debt had better do so in the next few days - or they may have to wait until late January.

Capital markets specialists and traders agree that the market for bank debt virtually closes down as yearend holidays approach.

"You don't want to be in the market trying to do a deal over Christmas," said Matthew J. Grayson, a vice president at Salomon Brothers Inc. "Starting in midweek the markets will shut down altogether. People get into the holiday spirit."

Times to Avoid

Banks are allowed to issue new debt whenever bond markets are open.

But as a practical matter, they usually avoid issuing new securities at certain times.

Most banks shun the corporate debt market early in a new quarter, finding it hard to make all the disclosures required under securities law while they are still toting up their quarterly results.

Moreover, investors are wary of buying bank securities before companies announce interim results, so they tend to demand relatively high yields on any new offerings that do reach the market.

Concern over Performance

Banks also shy away from the market around yearend. Institutional investors and traders are generally reluctant to take big new positions that might cut into their performance record.

In fact, what with holidays and vacations, many of them are simply not around to look at any new offerings.

"They have a little bit of money they want to put to work, but there's not a lot of wholesale buying going on," said Michael Hynes, a managing director and bank bond trader at Smith Barney, Harris Upham & Co. …

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