What are the market's expectations for the yield and liquidity of these subordinated notes in the secondary market?

Created August 07, 2025 at 08:10 PM

Short answer:

The Business Wire release does not contain any explicit statements from Byline Bancorp, its underwriters, or market analysts about how the 6.875 % Fixed‑to‑Floating Rate Subordinated Notes (due 2035) are expected to trade in the secondary market—i.e., there is no published “market‑expected yield” or “liquidity forecast” in the announcement itself.

Why the news itself does not give a direct answer

Item in the press release	What it tells us	What it does not tell us
Issuer: Byline Bancorp (parent of Byline Bank)	A well‑known regional bank with a NYSE listing (ticker BY).	No explicit credit‑rating or investor‑sentiment commentary.
Instrument: 6.875 % Fixed‑to‑Floating Subordinated Notes, 2035	Fixed‑to‑floating coupon, subordinated status, 15‑year maturity.	No guidance on expected secondary‑market yield spread over Treasuries, nor any mention of anticipated trading volumes.
Size & Structure: $75 m private placement, redemption of 6 % notes due 2030	The new notes are being used to replace the older 6 % notes; the coupon is higher, reflecting longer maturity and subordinated rank.	No explicit “pricing” guidance for secondary‑market investors.
Use of Proceeds: Redemption of 6 % notes	Shows a refinancing motive; the new notes carry a higher coupon because they are longer‑dated and subordinate.	No statements about expected investor demand or liquidity.

Because the release is focused on the completion of the financing transaction, it deliberately avoids market‑pricing commentary that is typically reserved for analyst reports, credit‑rating agency outlooks, or dealer‑run “road‑show” materials that are not publicly disclosed.

What market participants typically consider for a security like this

Even though the press release does not provide direct expectations, we can outline the key factors that analysts and investors generally examine to form a view on yield and liquidity for a private‑placement subordinated note of this type:

Factor	How it influences market expectations	Typical implication for this issuance
Credit quality of the issuer	Higher credit quality → lower yield spread; lower credit quality → higher spread. Byline Bancorp is a publicly listed bank with a B‑type rating (as of 2025) from major rating agencies.	Expected spread above Treasuries will be modest, but the “subordinated” tag adds a premium over senior debt.
Subordination	Subordinated debt is junior to senior debt and preferred stock in a liquidation scenario. Investors demand a premium for the additional credit risk.	Yield likely sits +150‑250 bps over comparable senior unsecured notes of the same maturity.
Fixed‑to‑Floating feature	Fixed‑to‑Floating (a “capped” or “floored” coupon that starts fixed, then converts to floating) reduces interest‑rate risk for investors. The fixed‑rate part (6.875 %) is relatively high for a 2025 issue, indicating that the market may demand a higher fixed component to compensate for the longer horizon and the subordination.	Yield may be slightly higher than a pure fixed‑rate note of the same maturity but lower than a pure floating‑rate instrument with the same credit rating.
Maturity (2035, ~15 years)	Longer maturity → higher yield, greater exposure to rate changes and credit risk.	Expect a term‑premium that adds ~100‑150 bps relative to a 10‑year note.
Size of issuance ($75 m)	Medium‑size for a regional bank. Not large enough to guarantee deep secondary‑market depth, but not tiny either.	Liquidity expected to be moderate: trading will likely be dealer‑driven with occasional broker‑dealer transactions; no formal “exchange‑listed” market.
Private‑placement nature	Private placements are typically sold to institutional investors (e.g., insurance companies, pension funds) who often hold the securities to maturity, resulting in lower day‑to‑day trading volume.	Expect lower liquidity than an exchange‑listed issue, but a stable, “hold‑to‑maturity” investor base.
Current market conditions (mid‑2025)	In 2025 the U.S. Treasury curve is relatively flat; banks are facing modestly higher funding costs due to a tighter monetary environment. Investors may be seeking higher‑yielding, longer‑dated bank debt to diversify portfolios.	Yield expectations could be +200‑300 bps over the 10‑year Treasury (≈5.0 % in 2025), placing the note’s effective yield around 6.5 %‑7.0 % (including the 6.875 % coupon plus a small spread for liquidity).
Redemption of older 6 % notes	By retiring higher‑rating, shorter‑dated debt (6 % due 2030) and issuing a higher‑coupon, longer‑dated security, the company is essentially trading up the interest rate on its debt. The market sees this as a refinancing move rather than a distressed one.	No negative pricing pressure; the market may view the issuance as a normal financing operation, supporting a stable price trajectory in secondary trading.

Putting the pieces together

Yield expectation: Based on the typical spread for a B‑rated, subordinated, 15‑year note in 2025, analysts would typically anticipate a yield in the low‑ to mid‑7% range (i.e., around 6.5 %‑7.5 % effective yield when you add the spread for subordination and term). The 6.875 % coupon is higher than the older 6 % issue because of the longer maturity and lower seniority.
Liquidity expectation: The notes are expected to be moderately ill‑liquid. Because they are a private placement, the primary market is limited to a set of institutional investors who often hold to maturity. In the secondary market, trades will generally be dealer‑driven (e.g., via broker‑dealers, securities finance desks). Expect modest bid‑ask spreads (perhaps 20‑40 bps) and limited daily trading volume, but with a stable investor base that reduces price volatility.

How you could verify or refine these expectations

Source/Method	What it would tell you
Dealer or Underwriter Commentaries	Typically a dealer will release a “price‑range” or “yield‑range” for the notes when the private placement is announced, and sometimes provide a “secondary‑market price” estimate.
Credit‑Rating Agency Report (e.g., S&P, Moody’s)	The latest rating outlook and the agency’s “yield spread” table for subordinated bank notes of similar rating/maturity.
Bond‑Market Data Providers (e.g., Bloomberg, Refinitiv)	Historical secondary‑market yields and bid‑ask spreads for similar “fixed‑to‑floating” subordinated notes (e.g., 6‑8 % coupon, 2024‑2027 issuances).
Dealer‐Driven “Liquidity” Scores (e.g., ICE “Liquidity Index”)	Could give a quantitative metric of expected liquidity for a given issue size and rating.
Analyst Reports on BY	Equity or credit analysts sometimes discuss the “cost of capital” after a refinancing, providing insight into expected yield spreads.
Regulatory Filings (e.g., Form 8‑K)	The filing might contain a “pricing” section with a “yield to maturity” figure and a brief note on expected secondary‑market trading.

Bottom line

Yield: The market will likely price the 6.875 % Fixed‑to‑Floating Subordinated Notes (due 2035) somewhere in the low‑ to mid‑7 % range (approximately a 200‑300 bps spread over the 10‑year Treasury), reflecting the longer term, subordination, and the “fixed‑to‑floating” structure.
Liquidity: Expect moderate to low liquidity in the secondary market: trades will be primarily dealer‑driven with modest bid‑ask spreads; the investor base will largely be institutions holding the securities to maturity rather than a broad retail market.
Caveat: Because the Business Wire release does not provide explicit market‑expectation figures, the above conclusions are derived from standard market practice and the characteristics of the issuance, not from a direct statement from Byline Bancorp or its underwriters.

If you need precise numbers (e.g., exact spread, bid‑ask, or market‑price forecasts), those would be found in dealer/underwriter price notices, credit‑rating agency analyses, or post‑issuance market data—all of which would be published separately from the press‑release you quoted.