An unprecedented 100-year bond issued by Alphabet Inc. earlier this year during a global debt surge has tumbled below 90 pence per pound face value for the first time.
Data compiled by Bloomberg shows the 1 billion pound ($1.34 billion) bond, maturing in 2126, traded at 89.978 pence on Thursday. When the tech giant issued the bond in February, the price was set just under par. The risk premium over a risk-free benchmark rate hit a high of 139.8 basis points.
Among all benchmark-sized senior corporate bonds globally, this instrument holds the longest remaining maturity. It is being hit by two forces: concerns over AI-related bond issuance, and a broad rise in government bond yields driven by renewed worries over fiscal deficits and inflation. With its extremely long modified duration, a 1 percentage point rise in yield could drive the bond's price down by nearly 15 pence.
Where the current concern lies
UniCredit credit strategist Michael Teig wrote in a report on Thursday that credit spreads on hyperscaler cloud service provider bonds have widened recently, reigniting debate over the viability of their business models, particularly given their massive capital expenditure levels.
According to data, long-dated bonds from Alphabet and another hyperscaler, Amazon, posted some of the biggest losses in the euro investment-grade bond market on Thursday.
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