Money is flowing into big-bank bonds as a haven from Friday's stock-market plunge

By Steve Gelsi

Investors are buying bonds issued by JPMorgan, Wells Fargo, Bank of America as spreads widen

Investor money was flowing into bonds issued by JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. during Friday's stock-market swoon on fresh worries of a recession.

The market movements suggest that investors are selling stocks and putting the money into bank bonds in search of yield.

The steepening yield curve in the bond market also helps bank balance sheets and favors their net interest income, which is the profit made by loans against interest payments for deposit holders.

Wells Fargo's bonds have drawn in the most buyers, followed by those of JPMorgan Chase, Bank of America Corp., Citigroup Inc. and Morgan Stanley, as the following chart from data solutions provider BondCliQ Media Services shows.

Bond spreads for Morgan Stanley and Wells Fargo widened by eight basis points each, while JPMorgan Chase & Co.'s bond spreads widened by about five basis points.

The action in bank bonds came as equity prices cratered Friday on fresh recession jitters in a broad market sell-off that enveloped bank stocks.

JPMorgan Chase's stock (JPM) fell 4.8%, Citigroup's (C) dropped 7%, Wells Fargo's (WFC) moved lower by 6.6%, Morgan Stanley's (MS) fell 5.8% and Bank of America's (BAC) declined by 4.9%.

Also read: The Dow dropped nearly 500 points. Is bad news on the economy no longer good news for stocks?

-Steve Gelsi

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08-02-24 1553ET

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