Century-bond flurry signals US market has peaked

The appearance of two rare 100-year corporate bonds within 10 days of each other in the US suggests that the rush to extend duration before the end of the Fed’s latest quantitative easing exercise (QE2) and the summer slowdown may have already peaked.

"The signs are that we are at the end of a bull market that started in the early 1990s.”   -Justin D’Ercole, head of investment-grade debt syndicate, Americas, at Barclays Capital

“Will US corporate borrowers be able to go long-duration a year from now?” asks Justin D’Ercole, head of investment-grade debt syndicate, Americas, at Barclays Capital in New York. “Probably not. The signs are that we are at the end of a bull market that started in the early 1990s.” MIT and Norfolk Southern

The two deals came from both ends of the investment-grade spectrum: triple-A rated Massachusetts Institute of Technology (MIT) and triple-B rated US railroad operator Norfolk Southern. MIT issued a $750 million 100-year bond paying a 5.6% fixed-rate coupon, equivalent to a yield of 130 basis points over the 30-year US Treasury bond. The science- and technology-focused university, founded in 1861, says it intends to use the proceeds to fund its campus development programme as well as academic and research capital projects.