Truist Financial Corp. is pricing a $1.75 billion bond offering with strong demand on Wednesday, a source in the bond market told MarketWatch.

Truist Financial
TFC,
+0.46%
is expected to price the notes maturing Oct. 30, 2029, about 225 basis points over the 5-year Treasury
BX:TMUBMUSD05Y
yield of about 4.9% on Wednesday.

Initial price talk was around 255 basis points but the spread tightened in a sign of healthy appetite for the debt. The Truist bond offering attracted about $8 billion in orders, in a sign of robust demand, the source said.

Truist bonds have also been drawing in more investors in the past 10 days than sellers in a reflection of interest in its corporate bonds.

Spreads on existing Truist debt have tightened or flattened in the days just before the bond offering in a sign of stability ahead of its debt issuance (see chart below).

Truist’s stock rose by 0.8% on Wednesday.

Prior to Wednesday’s offering, Truist issued $6.3 billion of fixed-to-floating rate senior notes with interest rates ranging from 4.78% and 6.05% due from June 8, 2027, to June 8, 2034, during the six months ended June 30, the company said in a filing.

Truist has typically issued debt three times a year since the company was formed in December 2019, after BB&T and SunTrust Banks closed their merger deal.

The company has aired plans to issue debt three- to four times a year. Past offerings have ranged from $500 million to $1.75 billion per tranche.

Banks are in need of raising money both to meet proposed increases in capital requirements by the U.S. Federal Reserve and to build up reserves ahead of an expected economic downturn in 2024.

Banks often raise debt after their quarterly earnings as well, which have been out in the past couple of weeks.

The deal from Truist comes after U.S. Bancorp
USB,
-0.06%
issued $1 billion in corporate bonds on Oct. 19. Goldman Sachs Group Inc.
GS,
+1.17%
issued about $4 billion in debt and BNY Mellon Corp.
BK,
+1.58%
issued $2 billion in bonds on Oct. 18, according to data from BofA Global Research.

PNC Financial Services Group Inc.
PNC,
-0.88%
raised $3.5 billion in corporate debt on Oct. 17, while Wells Fargo & Co.
WFC,
-0.41%
issued $6 billion in corporate bonds and JPMorgan Chase & Co.
JPM,
-0.09%
issued $7.25 billion in debt, both on Oct. 16.

Robust demand for the Truist bonds comes amid positive sentiment for debt issuance, which has been weak in 2022 and much of 2023. Moody’s Corp. Chief Executive Robert Scott Fauber said debt issuance has been running lower than normal, which suggests a potential uptick down the road.

“Overall corporate debt velocity, which is total corporate issuance as a percent of total corporate debt outstanding, remains pretty far below historical averages, so that implies the potential for pent-up issuance demand in the future,” he said on the company’s third-quarter conference call with analysts.

In July, Bond issuance after earnings from the U.S.’s six largest banks was expected to be about $30 billion, according to a Bloomberg analysis of JPMorgan data.

Also Read: JPMorgan, Citi and Wells earnings to unleash borrowing blitz by banks

Joy Wiltermuth contributed to this report.

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