Goldman's Bonds are riskier than that of Citi's for the first time since Feb-09

Goldman Sachs Group Inc. bond yields show the firm’s credit is more hazardous than Citigroup Inc.’s for the first time since February 2009 as speculation grows legal and regulatory risks will depress its revenue.

According to Bank of America Merrill Lynch index, debt from the most profitable Wall Street firm yielded 2.73 percentage points more than Treasuries on average as of May 4. That compares with a spread of 2.29 percentage points for Citigroup, which got a $45 billion bailout in 2008 and repaid $20 billion in December. At the end of March, Citigroup spreads were 0.45 percentage point wider than Goldman Sachs’s. Wider spreads mean the New York-based investment bank, with $180.4 billion of unsecured long-term borrowing, may pay an extra $7.6 million in annual interest on every billion of debt it issues.

Fitch Ratings revised Goldman Sachs’s A+ ranking outlook to “negative” from “stable” yesterday on concern its reputation may be tarnished.

U.S. prosecutors are investigating Goldman Sachs, where Lloyd Blankfein has served as chief executive officer since 2006. The Securities and Exchange Commission filed a civil lawsuit on April 16 alleging fraud tied to collateralized debt obligations. The firm called the SEC’s claims “unfounded.”

Meanwhile, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows that elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries rose 5 basis points to 158 basis points, or 1.58 percentage point. That’s the biggest jump since March 30, 2009, when spreads widened by the same amount to a record 511 basis points. The yield premium has risen 16 basis points from the 2 1/2-year low on April 21.

A benchmark indicator of U.S. corporate credit risk soared to the most in three months. The Markit CDX North America Investment Grade Index increased 7.3 basis points to 105.1, the highest since Feb. 8, according to Markit Group Ltd. The index typically rises as investor confidence deteriorates and vice versa.

Besides, the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 8 basis points to 122, the highest since Feb. 9. The extra yield investors demand to own emerging-market bonds over Treasuries also rose 10 basis points to 290, the highest since Feb. 26, according to JPMorgan Chase & Co.’s EMBI+ Index.