Citigroup Punished in 1st Bond Sale Since Writedowns

Citigroup Inc., the largest U.S. bank by assets, was punished by investors in its first bond sale since disclosing almost $17 billion in credit-market losses.

Citigroup yesterday sold $4 billion of 10-year notes at the highest yield relative to benchmark interest rates in the bank's history, according to data compiled by Bloomberg. The 6.125 percent securities yield 190 basis points more than Treasuries of similar maturity, up from 118 basis points, or 1.18 percentage points, in a similar offering by New York-based Citigroup three months ago.

Investors are demanding higher yields to own the debt of banks and brokerage firms as losses on securities linked to subprime mortgages and collateralized debt obligations mount. Total losses may reach $400 billion worldwide, Deutsche Bank AG analysts said in a report on Nov. 12, and Citigroup Chief Executive Officer Charles O. ``Chuck'' Prince stepped down Nov. 4 as the bank said it will write down the value of securities.

Rising risk premiums are ``a reflection of the markets not knowing what else may be under the surface in terms of additional exposure,'' said Derek Brown, a bond fund manager in Los Angeles at Transamerica Investment Management, which oversees $8 billion in fixed-income assets. Brown didn't buy the bonds.
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