Wall Street banks are cutting their investment-grade bond holdings as the securities lose the most since the 2008 credit crisis amid mounting concern the Federal Reserve will slow its stimulus efforts.
Dealers sold a net $3.1 billion of the notes during the past week, JPMorgan Chase & Co. credit strategists wrote in a note today. The biggest banks are paring inventories even as investors absorb $16 billion of new debt issuance in a weakening market, which is unusual, said the strategists led by Eric Beinstein in New York.
The selling comes after Fed Chairman Ben S. Bernanke said May 22 the central bank could slow unprecedented stimulus if the U.S. unemployment outlook shows sustainable improvement. Dollar- denominated investment-grade bonds are declining 0.2 percent this month following a 2.3 percent loss in May, the biggest since October 2008, according to Bank of America Merrill Lynch index data.
“It may reflect dealers coming into this selloff period longer than they wished,” the JPMorgan strategists wrote. “Presumably they are less long now.”
The most-creditworthy borrowers have sold $562.2 billion of bonds in the U.S. this year, more than the $496.5 billion issued by this time in 2012, when a record $1.12 trillion of the debt was sold, according to data compiled by Bloomberg.