NEW YORK: Morgan Stanley became the latest big Wall Street bank to tap the US investment-grade market after reporting earnings, as strong investor demand helps lenders borrow at lower yields than would have been possible at the start of the month.

The lender sold US$8bil of bonds in four parts, according to a source.

The longest portion of the offering, an 11-year security, yields 1.17 percentage point above Treasuries after initial discussions of around 1.4 percentage point, said the source.

Proceeds from the offering will be used for general purposes and Morgan Stanley was the sole underwriter of the deal, added the source.

A representative for Morgan Stanley declined to comment.

The sale came a day after the bank’s trading business posted the biggest increase among its peers in the second quarter. Morgan Stanley, like its rivals Goldman Sachs Group Inc and JPMorgan Chase & Co, beat expectations, solidifying the markets business as a hot spot across the industry.

JPMorgan, Wells Fargo & Co and Goldman have raised a combined US$16.5bil after reporting second-quarter earnings.

The deal by Morgan Stanley turbocharged volume from the six biggest banks past the 10-year July average of roughly US$17bil.

Blue-chip bond yields have fallen to the lowest in five months as Federal Reserve officials step up signals that they are moving closer to cutting interest rates.

The average US high-grade yield-to-worst, a measure of borrowing costs, hit 5.21% on Tuesday, the lowest since Feb 6.

Falling yields and strong investor demand have created an attractive playing field for the big banks.

Goldman’s US$5.5bil, two-tranche deal on Tuesday garnered US$23bil in peak investor demand, wrote Bloomberg’s Brian Smith.

That enabled Goldman to tighten pricing 28 basis points on both tranches, offering investors just two basis points to three basis point in new issue premium, or the extra yield that high-grade borrowers have to offer to sell new investment-grade debt, wrote Smith.

Wells Fargo’s US$2bil perpetual securities offering, the first preferred stock series by one of the so-called Big Six lenders in the United States in almost two months, received more than US$8bil in orders, according to Smith.

 - Bloomberg