June, 26, 2010

Investors in bonds issued by banks say they're sanguine about Washington's bank-regulatory overhaul, pointing to hopes that the landmark legislation will strengthen banks in the long run."Increased capital, and quality of capital, reduced leverage and increased liquidity are all things that will be negative for equity holders but are very good for bondholders," said Bob Bishop, chief investment officer for fixed income at SCM Advisors, which manages about $3.4 billion in assets. "The benefits of less leverage and more capital somewhat offset the risks of the resolution authority."

Financial firms are the nation's biggest industry in terms of debt issuance, according to Dealogic, accounting for nearly one-third of all corporate debt outstanding, or about $1.63 trillion.Although details hammered out early Friday by House and Senate negotiators have yet to be released, some investors remain worried that the version being submitted for a final vote in Congress next week would raise the cost of doing business for banks and increase borrowing costs for individuals and small businesses.