Banks may issue less debt if rates stay as high as last week's credit- market selloff sent them, some banking experts say.

James A. Bianco, director of research at Arbor Trading Group Inc. in Barrington, Ill., said last Friday was among the worst days ever for the government's benchmark 30-year Treasury bond, which fell 2.75 percentage points in price. The long bond's worst single-day performance was in March, when it fell 3.34 points.

The slide in bond prices - meaning that rates are rising - does not bode well for corporate bonds or debt issuance, said Mr. Bianco, who expects some rates to surge as high as 8% or 8.25%.

"Bank treasurers already think rates are too high, and aren't likely to issue paper now," said Mr. Bianco. "People are not interested in bonds; stocks are the place to be."

Bank bond analyst Michael Leit of Prudential Securities Inc. said he, too, has become concerned: "We are bearish on bonds."

He added, however, that if banking companies need to issue paper, they can and will work around higher interest rates through arbitrage strategies.

Some observers shrugged off the recent selloff as a knee-jerk reaction by a bond market jittery about inflation in a strong economy. The Friday selloff was a reaction to the government's announcement of an unexpectedly strong gain in hiring during June, a fall in the unemployment rate, and some gains in wages.

BankAmerica Corp., which has made five large public issues this year, said the prospect of higher interest rates will have little effect on its decision to issue debt.

"The level of interest rates does not affect the general amount of issuance that we do," said a BankAmerica spokesman. "It may affect whether we do a floating rate or fixed rate."

Scott Reed, chief financial officer of Southern National Corp., said banks have alternatives if interest rates tend to soar. He does not see Friday's bond selloff as a doomsday for bank debt issuance.

"People get nervous and tend to overreact to things," said Mr. Reed. "We have had generally lower rates for generally longer periods."

Mr. Reed conceded that higher interest rates will make Southern National's debt issues more expensive. But he pointed out that banks also can benefit from higher interest rates by investing in fixed-income products.

He said that when Southern issued its $250 million debt earlier in the year, it was priced at 7.05% coupon, and the bank was able to By Friday, yields had reach to 7.24% breaking its June tkttkt record of 7.23%

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