The 30-year fixed-to-floating rate securities may initially yield about 8.875 percent, according to a person familiar with the offering who declined to be identified because terms aren’t set. Citigroup plans to issue as much as $2 billion of the securities as soon as tomorrow, another person said.

Citigroup, 27 percent owned by the government, is selling the debt as borrowers marketed $13.2 billion of U.S. corporate bonds today, poised to be the busiest in more than a month. The New York-based bank’s offering shows that liquidity is improving in the markets, which in turn will help the economy, said Daniel Fuss, vice chairman at Loomis Sayles & Co. in Boston.

“It’s wonderful news for Citigroup and also shows markets are functioning very well,” said Fuss, whose Loomis Sayles Bond Fund is in the 97th percentile among peers this year, according to data compiled by Bloomberg.

Citigroup is selling the securities following a $7.6 billion loss in the fourth quarter after repaying $20 billion of trust preferred securities issued under the Treasury’s Troubled Asset Relief Program, set up in late 2008 to support financial firms and markets.

“It’s a capital structure need,” said David Hendler, head of U.S. financial services research at CreditSights Inc. in New York. “It’s not as dilutive like common equity issuance and they’ve already done a ton of that. Part of their earnings-per- share problem is they have a ton of shares from all that equity issuance they did last year.”

Novartis, MGM Mirage

Yields on corporate bonds are near five-year lows, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. They fell to 4.015 percent on Feb. 26, the lowest since May 31, 2005, and were 4.054 percent as of March 8.

Elsewhere in credit markets, Novartis AG, Switzerland’s second-biggest drugmaker, and MGM Mirage, the largest casino owner on the Las Vegas strip, led what was poised to be the busiest day for U.S. corporate bond sales since Feb. 4, Bloomberg data show. Novartis sold $5 billion of 3-, 5- and 10- year senior notes for its acquisition of Alcon Inc., the world’s largest eye-care company. MGM Mirage issued $845 million of 10- year bonds to repay some of its loans.

In Europe, Goldman Sachs Group Inc. led the busiest day for corporate issuance this year, with 10 sales totaling 7 billion euros ($9.5 billion) Bloomberg data show. New York-based Goldman Sachs, the most profitable securities firm in Wall Street history, priced 1.25 billion euros of seven-year debt in its first benchmark deal in the currency in five months.

Sales in Asia

Asian companies are selling record amounts of dollar- denominated bonds amid the lowest relative borrowing costs in more than two years and demand from international investors. BOC Hong Kong (Holdings) Ltd., the Hong Kong unit of Bank of China Ltd., and Chinese developer Evergrande Real Estate Group Ltd. led Asia-Pacific borrowers selling $38.4 billion of dollar debt this year, the fastest start on record, according to data compiled by Bloomberg. Sales climbed 35 percent from $28.4 billion in the same period last year, when they slumped 22 percent in the aftermath of the seizure in credit markets.

Nakheel PJSC bonds, part of parent Dubai World’s planned $26 billion debt restructuring, climbed the most in two months after JPMorgan Chase & Co. said creditors may get paid face value. The developer’s $750 million sukuk, or Islamic bond, added 5 cents, the most since Jan. 6, to 56.25 cents on the dollar, prices compiled by Bloomberg show.

Low Interest Rates

Federal Reserve Bank of Chicago President Charles Evans said low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his goal.

“With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Evans said in the text of a speech in Arlington, Virginia. Weakness in the job market, including long-term unemployment, means that “this accommodation will likely be appropriate for some time.”

In the loan market, Anheuser-Busch InBev NV, the biggest beer maker, will cut at least $90 million from annual interest costs by refinancing $17.2 billion of debt it took when the company was formed in 2008. Lenders to the maker of Budweiser set interest at 117.5 basis points over benchmark rates on three-year term loans, and 97.5 basis points on a five-year revolving credit line, according to two people with direct knowledge of the deal. That compares with a margin of 175 basis points the company is paying on its existing debt.

Credit-Default Swaps

The cost of protecting against U.S. corporate defaults rose. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, increased 1.2 basis point to 83.7 basis points, according to CMA DataVision. The Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings was little changed at 74 basis points.

Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years.

Citigroup shares rose 26 cents, or 7.3 percent, to $3.82 in New York Stock Exchange composite trading, the biggest rise since August, Bloomberg data show.

‘Screaming Bargain’

“People are looking at Citi more as a stable to hopefully gradually growing entity,” Hendler said. The stock is a “screaming bargain,” CreditSights analysts wrote in a March 8 report.

The bank raised more than $80 billion of new capital last year, increasing the number of shares outstanding during the last three years by sixfold to almost 30 billion. Its book value per share -- its net worth, divided by total shares outstanding -- tumbled to $5.35 as of Dec. 31 from $24.18 at the end of 2006.

Citigroup is the sole bookrunner on the sale, the company said today in a prospectus filed with the U.S. Securities and Exchange Commission. The filing didn’t specify the amount of the sale.

Citigroup’s $2.35 billion of 8.3 percent fixed-to-floating bonds due in 2057 rose 1.4 cent to 96.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The hybrid debt has more than tripled in price in the last year from 30.5 cents, Trace data show.