Goldman Sachs to Sell Bonds in First FDIC-Backed Offering

Now this is interesting. Goldman will be selling bonds to raise money that are 100% backed by the US government. I wonder what they will price at?

Now this is interesting.  Goldman will be selling bonds to raise money that are 100% backed by the US government.  I wonder what they will price at?

Bloomberg reports that:

"New York-based Goldman is managing the sale of the notes, which will mature in June 2012, the person said. Newly issued eligible bank bonds covered by the FDIC guarantee will receive a backed-AAA ranking from Moody’s Investors Service, the ratings company said today.

The rating reflects that the FDIC guarantee is “unconditional and irrevocable and backed by the full faith and credit of the Aaa rated United States government,” Moody’s said today in a statement.

The notes may price to yield about 85 basis points more than the midswaps rate, a benchmark for corporate borrowing in Europe, the person said. A basis point is 0.01 percentage point."

In theory, they should come out at the same price as Treasuries.  Because they are backed by the US government, they are, in essence, as safe as any debt issues by the US government - ie Treasuries.

If they come out higher then they represent a good deal and investors who purchase Treasuries should consider these bonds instead.  We can expect to see more FDIC backed bond sales from other banks.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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  • Sam Cass

    November 26, 2008

    Bloomberg is also reporting that the notes, which will comedue in June 2012 may price to yield 220 basis points more than Treasuries of similar maturity. That's a huge margin given the fact that they are technically as safe as Treasuries.

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