By Shankar Ramakrishnan

Jan 23 (Reuters) - U.S. and non-U.S. banks have raised $90 billion selling investment-grade rated bonds so far in January, making it already the busiest ever month for bank debt issuance, a BMO Capital report said.

This month's flood of bond issuance is partly due to seasonal factors but also stems from tight credit spreads - the premium companies pay over Treasuries - and strong demand from investors to lock in higher yields.

Bank bonds have become popular on expectations that the new Trump administration could ease regulatory capital rules and help their fee business with more merger approvals.

So far this month nearly $159 billion has been raised by investment-grade issuers and that, said BMO, is on track to meet or even exceed the month-end tally estimates of $175 billion.

"Banks always make up a predominant proportion of January supply, but bank issuance in 2025 has been extreme even by lofty historical standards," said Dan Krieter, credit strategist at BMO Capital.

The big six American banks set the stage by raising a combined $45.15 billion, which was a record for January, said Krieter. Now U.S. regional banks were likely to help the pace of supply, with PNC Financial Services raising $2.75 billion on Wednesday.

"Reception to yesterday's (Wednesday) PNC was very strong, with the deal coming almost 5x oversubscribed, showing demand should remain strong for any additional regional banks that come to market," he said.

Despite the huge supply, bank spreads also outperformed, evidenced by a 4 basis points tightening in the banking index compared to the broad IG index which is 1 bp narrower on the month, he added.

(Reporting by Shankar Ramakrishnan; editing by Philippa Fletcher)

((Shankar.Ramakrishnan@thomsonreuters.com; +1 2017590156;))