Microsoft drew exceptionally strong demand for a large bond sale, as investors made room for the top-rated company's first major debt offering in nearly a decade even with their portfolios already crowded with AI-related bonds.
The deal is expected to total at least $25 billion, with peak orders exceeding $115 billion, according to people familiar with the matter. Based on compiled data, that makes it one of the most heavily oversubscribed U.S. corporate bond sales on record.
The world's largest software company plans to issue the debt in as many as 10 tranches with maturities ranging from 2 to 40 years, the people said. It is also the first blue-chip hyperscaler to sell bonds since Alphabet priced a $25 billion offering on August 6.
The transaction will serve as an important test of investors' willingness to fund AI investment at a time of growing concern about the sustainability of the industry's heavy spending. Investors who once rushed to buy such bonds have sometimes turned cautious and demanded higher compensation for risk, while rising benchmark rates have pushed up borrowing costs.
The deal ends Microsoft's long absence from the bond market. According to compiled data, Microsoft last issued investment-grade bonds in 2017, raising $17 billion at the time. Microsoft is one of only two U.S.-listed companies with the highest AAA rating from both Moody's and S&P, alongside Johnson & Johnson.
"The timing of the deal feels opportunistic," said Brett Kozlowski, a portfolio manager at GW&K Investment Management. He added that given the uniqueness of such "very rare long-dated AAA debt" and the possibility of yields above 6%, strong demand is not surprising. "Despite the challenges posed by heavy bond supply, this combination may highlight that investors still want some diversification in issuers," he said.
The longest tranche, maturing in 2066, was initially indicated at a spread of up to 135 basis points over Treasuries, according to people familiar with the matter. Based on Trace pricing data, that is roughly in line with where Alphabet and Amazon 40-year bonds are currently trading, though those two companies carry lower credit ratings.
Wells Fargo, JPMorgan and UBS are managing the bond sale. Proceeds will be used for general corporate purposes, including capital expenditures, the people said. Microsoft and the banks involved either declined to comment or did not immediately respond to requests for comment.
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