U.S. Banking Issues Lose Their Popularity In Eurobond Market
LONDON -- U.S. bank issues are losing their luster in the Eurodollar bond market. Worries about the U.S. banking system are prompting international investors to pay more for the traditionally less-coveted debt of European banks than for that of U.S. banks.</br></br>Only a year ago, U.S. banks were widely regarded as benchmark international borrowers and could pay the lowest interest rates in the Eurodollar floating-rate note market. But currently U.S. banks are paying a higher average interest rate on their notes than Austrian, British, Canadian, Japanese and West German banks, according to a report by Jeffrey Hanna and Gioia M. Parente, analysts at Salomon Brothers Inc., a New York investment bank.</br></br>While this reversal is partly the result of a recent heavy supply of new U.S. bank issues in the Euromarket, it also stems from "international concern regarding the soundness of the U.S. banking system," the Salomon analysts say. Moreover, the trend isn't likely to disappear in the near future, they add.</br></br>Several prominent Eurobond specialists agree, noting that international credit markets have been buffeted this year by the collapse of some small U.S. government securities dealers and by the temporary closing of 70 thrift institutions in Ohio.</br></br>"No doubt about it, there's much more skittishness toward U.S. banks in the international capital market," says Hans-Joerg Rudloff, deputy chairman of Credit Suisse First Boston Ltd., the leading underwriter of bonds and floating-rate notes in the Eurobond market.