Spreads on bank bonds have widened by 5 to 10 basis points in the past two weeks, prompting debate about whether the spate of new bank issuance of the past two months has run its course.
While analysts agree that certain conditions encouraged opportunistic new issues, some feel that a significant change has taken place in the issuing environment.
"That window of opportunity has probably passed at this point," said Ethan M. Heisler, a bank bond analyst at Salomon Brothers Inc. "Things should probably quiet down going into the summer."
Mr. Heisler said that widening spreads on outstanding traded debt and on new issues as they have come to market may dissuade some banks, which are generally well capitalized, from marketing additional subordinated 10-year bonds.
Spreads on bank bonds represent the premium over Treasuries of comparable duration. Bonds with wider spreads are more costly for the issuer.
Citicorp's bonds were trading at 79 basis points over Treasuries, 12 basis points wider than its initial price for $150 million of 10-year notes issued on May 1.
National City Corp., which issued $250 million of 10-year notes on May 17, has seen some widening in its spreads as well. Spreads on the National City's 10-year bonds widened 9 basis points between May 9 and May 23, to 74 basis points over Treasuries.
Other banks that have seen their spreads widening include BankAmerica Corp., to 80 basis points over Treasuries on Wednesday, from 73 on May 9; Chase Manhattan Corp., to 84 from 79 in that period; and Banc One Corp., to 70 from 60 basis points.
Mr. Heisler said that the widening bank spreads on traded and new issues had discouraged activity.
"The market was basically saying, as the deals were not getting done as well as in the past: Enough already. That suggests to me we won't see the same kind of frenzied issuance," said Mr. Heisler.
While a market hungry for bank debt had tightened spreads on new issues through much of April and May, new issues were as well received in the past week.
Spreads on a total of $1.5 billion in bonds from Society National, National City, and ABN Amro widened by several basis points after they came to market last week.
Investors may have shown less interest in some of these deals because the issuers became a bit aggressive, suggests David A. Hendler, a fixed- income analyst at Smith Barney.
Analysts said that other corporate issues, such as a recent $1 billion in Viacom bonds, might have turned the market against new bank notes in the past week.
Investors waiting for bank earnings may also slow the interest, and therefore the supply, of bank bonds, said Mr. Hendler.
To be sure, some analysts said banks still had some opportunities to issue new bonds.
"The opportunity will continue to be there," said Allerton G. Smith, a fixed-income analyst at Donaldson, Lufkin & Jenrette.
But Mr. Heisler said that bank spreads are being driven much more by technical factors than fundamental banking trends.