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Money Flows Into Bonds of Major Banks Ahead of Earnings Season


In a positive indication ahead of the fourth-quarter earnings season, investors have been pouring money into bonds issued by the largest money-center banks. Bank of America Corp. and Citigroup Inc. have emerged as the top choices, with net buying surpassing selling for their selected bonds. Bonds from Bank of America drew in $461 million of net buying, followed closely by $441.7 million for Citigroup. Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wells Fargo & Co. also experienced significant net buying totaling $278.3 million, $236.5 million, $138.5 million, and $109.5 million, respectively. This data is based on information from BondCliQ.

Furthermore, the basis-point spreads between the selected bank bonds and the 10-year Treasury BX:TMUBMUSD10Y have tightened over the past two weeks. This decrease in spread between basis points paid to bondholders and the yield offered on the 10-year Treasury implies that investors perceive these bonds to be of lower risk. In contrast, a higher spread would indicate a higher level of risk compared to Treasurys.

While stocks in major banks rallied in the fourth quarter, equity prices have cooled off in recent days. The upcoming earnings season is crucial for these six banks. The season kicks off on Friday with updates from JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup. Morgan Stanley and Goldman Sachs will report their results on Tuesday.

During the fourth quarter, earnings estimates from analysts declined due to stalled dealmaking and persistent economic headwinds.

Also read: JPMorgan, Bank of America Lead Earnings Parade of U.S. Largest Banks to Cap Off Tough Year

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