Wall Street Banks Expected to Deluge Markets With Bonds After Earnings

Banks could be about to deluge the market with more bonds after they post quarterly results, borrowing at a breakneck pace even as other blue-chip companies pull back, and bondholders could suffer in the process.

Barclays Plc projects the six largest US banks will raise between $35 billion and $45 billion in bond markets in the fourth quarter, compared with an average of $30 billion for the quarter since 2014. In the weeks after earnings, the firms might sell as much as $30 billion, the lender forecast. Banks are selling bonds as Federal Reserve rate hikes spur depositors to put their money elsewhere, cutting into a key funding source for the lenders and forcing the firms to find other financing.

JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc. are the most likely to sell notes soon after posting results, according to Barclays. JPMorgan, Citigroup, Morgan Stanley, and Wells Fargo & Co. are among the companies slated to report on Friday.

Financial companies have been selling plenty of debt already this year, around $530 billion of notes through Oct. 12, about half of total investment-grade issuance. Sales volume for corporations like banks and insurers is up a bit from the same time last year even as broader volume is down by more than 10%, according to data compiled by Bloomberg News.