As the Trump administration intensifies pressure, Wall Street's financial giants are poised to enter their customary period of heavy borrowing. To counter significant operational pressures recently brought by the Trump administration, their bond issuance scale this time could be substantially larger than in previous periods, potentially draining a significant portion of market liquidity—implying that the currently soaring, record-high corporate bond and stock markets might enter a corrective trajectory due to the liquidity drain. Major financial giants currently facing sustained pressure from the Trump administration on mortgage and credit card rates appear ready to launch large-scale bond sales shortly after reporting earnings.
The year 2026 has just begun, and these global largest financial institutions face a major variable: U.S. President Donald Trump, who is increasingly willing to pressure these Wall Street giants. Bond market traders widely anticipate in a survey that overall investment-grade issuance will be very busy this week, estimated at around $60 billion, likely led comprehensively by the six largest U.S. financial giants. Barclays' bond trading team in New York previously forecasted in a December report that approximately $35 billion of this month's bond issuance would come from the "Wall Street Big Six," a figure likely to surge further to $55 billion by the end of the quarter.
High-grade bond issuance typically absorbs substantial funds in the primary market, creating short-term "supply pressure" that tightens financial conditions. More direct effects usually manifest in technical short-term rises in credit spreads/risk-free rates and bond market liquidity premiums. Therefore, a sudden, concentrated large-scale bond issuance by Wall Street giants under certain pressures could become a "marginal headwind" for risk assets like stocks, cryptocurrencies, and high-yield corporate bonds. The so-called "Big Six / Wall Street Big Six" from bond traders' perspective typically refers to the six U.S. systemically important universal commercial banks and investment banking groups: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.
The U.S. stock earnings season is also about to commence, with Wall Street's largest financial giants reporting first. Thus, this latest U.S. earnings season will not only be a major test of Wall Street's consensus expectation for the bull market to continue into 2026—analysts generally expect the S&P 500 to maintain its bull run and potentially target 8,000 points—but also a significant test for the share prices of these Wall Street mega-banks, which are already at historic highs amid the long-term bull market atmosphere, investment banking recovery, and surging client trading volumes.
Trump has called for capping credit card rates at 10%, targeting the "crown jewels" of banks. According to the latest market dynamics, the White House's new demand—for credit card lenders to limit their rates—could significantly drive bond issuance by the Wall Street Big Six, prompting massive debt sales to cover potential major operational losses from forced rate pressure. President Donald Trump over the weekend broadly called for all U.S. lenders to set a 10% rate cap for one year, which exerted significant selling pressure on financial institutions with credit card businesses on Monday. By Monday's close, Capital One fell nearly 8%, American Express dropped over 4%, and even JPMorgan saw an intraday decline exceeding 2%, closing down 1.43%, with Wells Fargo and Bank of America also finishing down over 1%.
Arnold Kakuda, a senior credit analyst at Bloomberg Intelligence, noted that the likelihood of the White House's proposed cap being implemented remains uncertain, emphasizing that the U.S. President cannot unilaterally enforce it; related measures require Congressional legislation. "It's unclear how much impact this would have on bank profits, if any. Other potential rule changes, like the government's implementation of global capital rules, are also still in flux," Kakuda stated. The sensitivity to a 10% cap arises because it targets not a peripheral fee but forcibly压缩es yields on unsecured, higher-loss, risk-pricing-dependent assets like credit cards to levels far below current market pricing.
Credit card businesses are typically one of the richest profit pools in Wall Street giants' retail finance segments—characterized by high yields, multiple fee items, and often superior capital returns. The average U.S. commercial bank credit card plan rate recently hovered around 21%, higher for interest-bearing accounts, significantly exceeding most other retail loan types. Key reasons for persistently high credit card rates include bad debt and charge-off risks, operational and customer acquisition/fraud costs, and pricing needed to cover risk premiums; NY Fed analysis also links the "rigidly high" rates to risk and cost structures.
Therefore, if rates are forcibly capped, banks' common responses would include tightening credit, reducing limits, cutting cashback and rewards, raising annual or other fees, or even exiting high-risk customer segments, transforming "profit pressure" into "supply contraction" and "benefit回收." In this sense, Trump's call for a one-year 10% cap is seen as impacting the "crown jewels" because it directly and immediately compresses banks' most profit- and valuation-sensitive credit card business, while policy uncertainty itself elevates risk premiums.
Additionally, the substantial MBS purchases by the "GSEs" to lower mortgage rates are also negatively impactful for the U.S. Big Six. The White House is pushing Fannie Mae and Freddie Mac to purchase a considerable additional volume of MBS, aiming partly to lower mortgage rates. Significant declines in mortgage rates reduce yields on newly purchased MBS and newly originated mortgages, which is not inherently friendly to large commercial banks' net interest margins, especially when liability costs are rigid; rate declines often trigger higher prepayments/refinancing, causing duration/convexity and hedging cost changes for MBS or mortgage-related asset holders.
Simultaneously, borrowing costs remain relatively cheap for Wall Street's large banks. Year-to-date, investment-grade bond spreads average just 0.78 percentage points, or 78 basis points, never exceeding 85 bps since June 2025. Robert Smalley, Managing Director at MacKay Shields, stated, "Against the backdrop of current spreads and composite yield levels, the vast majority of the Big Six should consider benchmark-sized bond issuance after reporting earnings."
Large U.S. commercial banks like Bank of America and JPMorgan typically commence funding in the investment-grade bond market shortly after earnings to benefit from the positive investor sentiment fueled by generally optimistic results. These six banking super-giants are projected to collectively achieve up to $157 billion in profits for 2025, potentially their second-highest annual profit ever. For 2026, Barclays expects the "Wall Street Big Six" to issue approximately $188 billion in high-grade bonds across all currencies, implying a 7% year-over-year increase, potentially driven by a 20% rise in maturing and redeemed volumes.
JPMorgan will report quarterly earnings Tuesday, followed by Bank of America, Citigroup, and Wells Fargo on Wednesday, with Goldman Sachs and Morgan Stanley on Thursday. Smalley added, "For the full year, we expect robust demand for bank credit assets, given economic activity and a stronger M&A environment, to offset any market perception of supply reduction due to regulatory changes."
Wall Street giant JPMorgan kicks off earnings season. When JPMorgan reports Q4 earnings Tuesday morning, the latest U.S. earnings season will commence. Wall Street analysts generally expect this week's large bank cohort to demonstrate the financial sector's overall strong performance. The new U.S. earnings season officially begins this week, with giants like Goldman Sachs, Morgan Stanley, and JPMorgan leading the way. Their results and management's future outlook will significantly impact U.S. and global stocks, with markets hoping for better-than-expected growth and optimistic guidance to start the season.
Regarding 2026 growth expectations for large Wall Street banks, the main profit engines remain the NII recovery cycle and asset repricing. Analysts at Goldman Sachs note that consensus expectations may significantly underestimate the resilience of strong growth in NII, investment banking, wealth management, and equity trading businesses. Goldman expects the NII recovery cycle to extend into 2027, so the Wall Street giants reporting first could add fuel to the U.S. bull market.
As Wall Street banks prepare to kick off earnings season, Goldman Sachs published a report stating a "constructively positive" outlook for U.S. bank stocks in 2026,看好 the upcoming Q4 2025 earnings season, and expecting strong results from giants like JPMorgan, laying a significant foundation for continued profit expansion and the bull market's continuation in 2026. Goldman's analyst team recommends investors buy large universal bank stocks like Bank of America, JPMorgan, and Citigroup on dips.
Goldman's analysts stated that entering 2026, the large bank sector is on a "more favorable, sustainable" profit path—net interest income is expected to continue recovering through 2027 after bottoming in mid-2024; capital markets and wealth management fees remain resilient with moderate growth; while revenues and profits improve substantially, expense growth remains stable, creating positive operating leverage; regarding capital and buybacks, Goldman lists "potential regulatory capital reforms and capital return pace" as key variables. On improved capital conditions, Goldman expects regulatory reforms following the Trump administration's banking deregulation to significantly enhance capital returns, primarily reflected in excess capital supporting buybacks.
The Trump administration's commitment to reducing federal regulation on large companies, especially Wall Street giants, and further tax cuts represent substantial medium-to-long-term positive fundamentals for large Wall Street banks.
