Bank of America Corp., Citigroup Inc., and Wells Fargo & Co. plan to sell notes backed by the Federal Deposit Insurance Corp. as banking companies take advantage of a government guarantee to lower borrowing costs.
B of A told investors in an e-mail that it is marketing fixed-rate bonds due June 15, 2012, that may price to yield about 85 basis points more than the midswap rate.
Citi and Wells are also marketing FDIC-backed debt in the second week of bank issuance spurred by the Temporary Liquidity Guarantee Program. Last month the agency strengthened the program's final rules to promise investors timely payment of principal and interest in case of a default.
The program "is providing funding for a lot of institutions, some of which people were worried about going under," said Gregory Habeeb, a money manager at Calvert Asset Management Co. in Bethesda, Md., who helps oversee $8.5 billion of assets.
The FDIC-guaranteed note offerings are rated Aaa by Moody's Investors Service Inc. and AAA by Standard & Poor's Corp.
Citi planned to sell notes backed by the FDIC as soon as Monday, according to a person familiar with the transaction who asked not to be identified because the terms were not set.
Goldman Sachs Group Inc., Morgan Stanley, and JPMorgan Chase & Co. opened the market for government-guaranteed bank debt last week, raising $17.25 billion.