Markel, Northwestern Mutual price; IG bond market sees largest inflow since 2014, strategist says

By Rebecca Melvin

New York, Sept. 13 – The investment-grade bond market went quiet Friday with two previously announced deals heard to have priced and one company announcing plans to price a preferred issue.

Markel Corp., a Glen Allen, Va.-based financial holding company, priced $800 million of senior notes in two parts on Thursday. The parts included a $300 million tranche of 3.35% 10-year notes at a Treasuries plus 158 basis points and a $500 million tranche of 4.15% 31-year notes that sold at a Treasuries plus 190 bps spread.

In addition, Northwestern Mutual Life Insurance Co. priced $600 million of 3.625% surplus notes due 2059 on Thursday.

The Milwaukee-based financial services and mutual insurance company also made an exchange offer for noteholders who opt to exchange their 6.063% surplus notes due 2040 for the new notes. New notes issued in the exchange will be fungible with the original $600 million issue.

Looking ahead, Rexford Industrial Realty, Inc., a Los Angeles-based real estate investment trust, said it plans to price an offering of $25-par series C cumulative redeemable preferred stock.

The preferreds are redeemable after five years at par. Prior to that, they are redeemable within 120 days after a change of control at par.

Rexford said the proceeds will be used to fund future acquisitions by its operating partnership and to fund its development or redevelopment activities and for general corporate purposes.

Investment-grade bond issuance remained robust on Monday, following a record post-Labor Day week last week. But as predicted, primary activity waned as the week wore on and deal sizes for the most part were smaller.

But the IG corporate bond market remains robust overall, with the largest inflow this past week since 2014.

The inflows to U.S. investment grade funds and ETFs jumped to $6.94 billion for the week ending on Sept. 11. That was the third largest inflow on record going back to 2008 and the biggest since October 2014, according to a note from Bank of America Merrill Lynch.

The increase from a $3.95 billion inflow a week earlier was flows ex. short-term and by ETFs rather than funds, BAML credit strategist Yuri Seliger said in the note.

Flows also improved for stocks, where after five weeks of selling investors bought $13.6 billion this past week, representing the biggest inflow since June and up from a $3.9 billion outflow in the prior week.

On the other hand, government bonds reported a small $120 million outflow following a $2.41 billion inflow a week earlier.

During this past week, the average new issue concession increased to 9.9 bps, while the average break performance improved to 2.8 bps tighter. This week's new issues are trading 3.6 bps tighter on average from pricing, the strategist said.

On the week, the heaviest volume day was Monday when Air Lease Corp. sold $1.1 billion in two tranches and Plains All American Pipeline, LP priced $1 billion of 3.55% senior notes to yield 195 basis points.

Expedia Group Inc. announced on Wednesday that it has agreed to sell $1.25 billion of 3.25% senior notes due 2030 at 99.225 in a private Rule 144A and Regulation S offering.

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