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….

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For companies looking to raise money through the debt markets, and the bankers egging them on, it seems no sum is too large.

Verizon Communications shattered records and shook up the bond world on Wednesday when it sold $49 billion of investment-grade corporate debt at one time.

It was the largest deal of its kind, exceeding Apple’s $17 billion bond sale in April and illustrating the degree to which low interest rates are enabling corporations to borrow money inexpensively.

Verizon undertook the huge sale of corporate debt as it moves to finance its $130 billion deal to buy out Vodafone’s 45 percent stake in their Verizon Wireless joint venture.

The ease with which Verizon raised so much money caught even longtime market participants by surprise and fed speculation that more companies might tap the debt markets before interest rates begin to rise, as is expected.

“We’re starting to see the animal spirits pick up again,” said Kathy Jones, a fixed-income strategist at Charles Schwab. “Usually, once it gets going, it doesn’t let up.”

One banker involved in the offering said he was counseling corporate clients that now was an ideal time to raise more money for acquisitions.

“From an M.& A. perspective, nothing is out of reach,” he said. He spoke anonymously because he did not want to damage his relationship with his clients. Verizon’s buyout of the Vodafone stake in the wireless business — the third-largest corporate acquisition after Vodafone’s $203 billion takeover of the German cellphone operator Mannesmann in 2000, and the $182 billion merger of AOL and Time Warner in 2001 — was in the works for years, but it was finally struck last week, in part because Verizon wanted to take advantage of low interest rates while they lasted….

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The bond market is helping to make Sprint Corp. (S)’s promises to its bank lenders irrelevant.

The third-largest U.S. wireless carrier, backed by new majority owner Softbank Corp. (9984), said in a regulatory filing yesterday its $6.5 billion bond sale on Sept. 4 was enough to violate the terms of its loans “by a significant level” at the end of the month. While Sprint is in talks with lenders to amend the leverage covenant, the company also said it has the money to pay off its loans and cancel $4.5 billion of credit facilities if it fails to reach an agreement.

Sprint’s willingness to sacrifice its borrowing capacity including a $3 billion unsecured revolving credit line arranged by Citigroup Inc. and JPMorgan Chase & Co. underscores the security provided by Softbank, a company with a $78 billion market value, three times the size of the U.S. unit. That enabled Sprint to complete the biggest junk-bond offering since 2008 at lower relative yields than it paid a year ago and also increases the chance it will get the covenant amendment, according to KDP Investment Advisors Inc….

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