Corporate bond issuance by banks in July was unusually strong as interest rates fell to levels last seen in early 1995. Bank debt issuance during the summer months typically slackens, often dropping dramatically during July after the vigorous issuance period that occurs just before reports of second-quarter earnings. This year, however, banks shouldered their way to the capital markets as interest rates fell to levels that were too low to ignore. According to Securities Data Co., banks issued $14.7 billion of securities in July. Though that is down from $39.7 billion in June, it amounts to almost twice the volume of last July, when banks issued just $7.3 billion in securities. Banks were particularly aggressive last week as rates plunged to lows for the year. On Thursday, the coupon on 5-year, 10-year and 30-year government securities fell to 5.90%, 6.01%, and 6.30%-the lowest in the last 17 months. That same day, banks issued more than $1 billion of securities "The price was right," said bank bond analyst Katharine Rossow of Chase Securities Inc. "Banks came to market because of the pricing." Ms. Rossow added that the attractive rate environment also has encouraged investors to come off the sidelines and put their money to work. "You have a considerable amount of demand on the buy side, particularly for high quality paper," said Ms. Rossow. "Investors have also become less concerned that interest rates will go up." Banks that issued include Bankers Trust, which came to market with $100 million in 15-year subordinated debt, as well as others. Chase Manhattan Bank USA came to market with two issues, a $500 million deal and a $50 million deal, each in floating-rate notes. First National Bank of Chicago issued $115 million of two-year medium- term notes, while First of America issued $150 million in trust-preferred securities. PNC Bank NA issued $8 million of five-year floating-rate notes. Smaller banks such as Bank One Texas also spotted the opportunity. That bank issued $250 million in subordinated notes. Ms. Rossow said that she expects the robust issuance to continue. "It very well might carry into August because the rate scenario is still quite good," she said. Market conditions were a bit less favorable on Friday as rates rose on the stronger-than-expected reports on employment from the Labor Department and on manufacturing from the National Association of Purchasing Managers. The July unemployment rate of 4.8% was the lowest reported since November 1973; the economy added 316,000 new payroll jobs. The purchasing managers index registered strong expansion in the economy for the 14th straight month. But with inflation dormant, no sustained upturn in rates is on the horizon.

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