Bond investors don’t perceive the six biggest U.S. banks as “too big to fail,” according to a report from one of those lenders, Goldman Sachs Group Inc.

The half-dozen largest U.S. banks by assets have had an average funding-cost advantage over smaller competitors of 0.31 percentage point since 1999, according to the report from the New York-based firm. The advantage was widest in the financial crisis and then reversed so that the biggest banks now pay an average 0.10 percentage point more than smaller ones, the study found.

Some policy makers have said the biggest U.S. banks -- JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Goldman Sachs and Morgan Stanley -- benefit from cheaper borrowing costs because bond investors assume the government will bail them out in a financial crisis, as happened in 2008. Lobbyists for the lenders have pushed back against proposals that aim to counteract that funding advantage.

“We find that the largest firms in nearly all industries do indeed benefit from lower bond-funding costs than their smaller peers, and that the biggest banks actually benefit less,” according to the report. “This undermines the notion that government support drives a TBTF funding advantage.”

The report analyzed bond spreads for the six biggest U.S. banks and all others whose debt is included in the iBoxx investment-grade debt index, a listing created by Markit Group Ltd., which is partly owned by Goldman Sachs.

Liquidity Gap

Big banks depend more on bond-market funding than small lenders, which use deposits to fund their loans. The report asserts that the banks that sell more debt are more attractive to investors because the size of the bond issues makes them easier to trade.

“Investors are willing to pay for the benefits of liquidity, and large firms tend to have more liquid bonds,” according to the report. “In fact, the added liquidity itself could account for the observed funding advantage for the largest banks.”

The report cites data from Trace, the bond-price reporting system of the Financial Industry Regulatory Authority, that shows that the bonds of banks with more than $500 billion in assets trade “virtually every day,” while those issued by the smallest lenders in the market change hands just once a week.

“It would take close to three months for markets to trade just $50 million of a typical small bond-issuing bank’s debt,” according to the report. “For one of the largest banks, this could be accomplished in less than two hours.”