By Sarika Gangar and Matt Robinson
For the first time since before the credit crisis, bond buyers are demonstrating more confidence in the U.S. banking system than in industrial companies as lenders fortify balance sheets while firms from Verizon Communications Inc. (VZ) to Apple Inc. (AAPL) borrow record amounts.
Relative yields on bonds from Citigroup Inc. (BAC) to JPMorgan Chase & Co. (JPM) were 3 basis points less than the average for industrial notes last week, the first time since September 2007 that investors didn’t require more from bank borrowers, Bank of America Merrill Lynch index data show. The relationship reversed after bank bond spreads surged to an unprecedented 365 basis points more than industrials amid the worst financial crisis since the Great Depression.
Lenders sitting on a record $9.5 trillion of deposits are winning over the bond market after increasing a measure of their capital cushions by about 54 percent to meet regulations intended to prevent a repeat of the turmoil that followed the 2008 bankruptcy of Lehman Brothers Holdings Inc. and contributed to more than $2 trillion of writedowns and losses at the world’s biggest financial institutions….