Major banks are holding off issuing debt because of an uncertain marketplace.
Last week, Brazil's currency, the real, was devalued by as much as 30%, raising concerns that troubles there could spread to other Latin American countries and affect the U.S. economy. Rumors about a possible devaluation by Hong Kong also created market unsteadiness.
The volatility cast a pall over the clear skies that led J.P. Morgan & Co. to issue $1 billion of debt and Morgan Stanley Dean Witter & Co. to issue $2 billion last week.
It dampened the plans of several major banks who "were queued up to issue debt," said one market expert who requested anonymity.
That group included Citigroup and BankAmerica Corp., as well as Chase Manhattan Corp., which pulled a $500 million bond deal in December.
Bank bond analyst Eric Grubelich of Keefe, Bruyette & Woods Inc. said he would not be surprised if some banks looking to issue debt had changed their minds because of the turbulent market.
Because of consolidation, many banks have grown substantially, which means that they will issue frequently, Mr. Grubelich said. "But the market has gotten a little bit sloppy."
Spreads-the difference in corporate bond yields and those of Treasuries- widened 5 basis points early Friday as investors grew anxious and began dumping bonds.
J.P. Morgan's $1 billion debt deal, which priced Wednesday at 137.5 basis points over Treasuries, also felt the effects. Spreads on the deal, the largest subordinated debt deal ever issued by a bank, widened to 143 basis points over Treasuries by Friday afternoon.
Meanwhile, Dime Bancorp issued $200 million in two-year notes priced at 187.5 basis points over Treasuries. The issue is expected to trade today.