Norfolk Southern Dangles Duration Bet With 100-Year Bond Sale

Norfolk Southern Corp. is betting investors aren’t that afraid of rising yields after all.

The railroad operator sold $600 million of 100-year corporate bonds, the first to hit the market since 2018, which were also sold by the company. Monday’s offering will be just the ninth century bond issued by a corporation since 2005, according to data compiled by Bloomberg.

Investors have recently shied away from taking on duration risk as bond yields rise amid an economic recovery from the pandemic. However, there are signs they’re starting to warm up to longer-dated bonds again as 30-year Treasury yields stabilize and volatility subsides, encouraging more companies to issue further out the curve.

Read more: JPMorgan to BlackRock turn away from duration as economies open

Bonds maturing in 10 years or more generated total returns of 1.7% in April, the most of any high-grade maturity bucket, according to Bloomberg Barclays index data. EBay Inc., Equinix Inc. and Southern Co. are among high-grade companies selling 30-year debt Monday.

While century bonds -- especially those from companies -- are rare, countries tend to be more common issuers. Peru sold $4 billion of such debt in November, back when the 30-year yielded around 1.5%. It’s now up to nearly 2.3%.

Norfolk’s century bond will yield 180 basis points over Treasuries, about 20 basis points less than initial discussions, and proceeds will be used for general corporate purposes, according to a person with knowledge of the matter. It’s also selling $500 million of 10-year notes to be allocated for green projects.

Bank of America Corp., Morgan Stanley and Wells Fargo & Co. managed the deal, said the person, who asked not to be identified as the details are private.

©2021 Bloomberg L.P.

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