Tuesday, May 5, 2009

Goldman Sachs Says U.S. Bank Debt Is ‘Attractive

Oh goodie. Lets all run out and buy some!

Story By Bryan Keogh and Eric Martin

May 5 (Bloomberg) -- Goldman Sachs Group Inc. said U.S. bank debt is “attractive” and boosted its rating on Bank of America Corp. and Capital One Financial Corp. bonds to “outperform.”

Yields relative to benchmark rates on bonds of many U.S. banks remain at or near their record highs even after a rally in the debt caused spreads to narrow, analysts led by Louise Pitt wrote in a note.

“We believe there is demand for senior paper from investors, which we view as a positive development for the sector,” Pitt said in the report. “U.S. banks also look like a better value than their European counterparts.”

Spreads on U.S. bank debt have narrowed to 654 basis points from a high of 823 basis points on March 11 as financial companies reported record fixed-income trading results and the U.S. conducted stress tests to gauge their capital needs. Financial shares jumped the most in almost a month yesterday on optimism the tests may show banks in better shape than anticipated.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said he expects the Federal Reserve to announce stress-test results on May 7, and for many banks to release the results themselves a day later. A basis point is 0.01 percentage point.

To contact the reporters on this story: Bryan Keogh in New York at bkeogh4@bloomberg.net; Eric Martin at emartin21@bloomberg.net

Last Updated: May 5, 2009 17:03 EDT


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