Key facts
- Alphabet's 100-year bond, issued in February, has dropped below 90 pence on the pound.
- The bond's value has declined by over 7% since its issuance.
- The bond matures in 2126 and was part of a £32 billion offering.
- Rising inflation expectations and skepticism about tech AI investments are cited as reasons for the decline.
Alphabet's landmark 100-year bond, issued in February, has seen its value drop below 90 pence on the pound for the first time, losing over 7% of its face value within five months. The £1 billion bond, due in 2126, was part of a larger £32 billion offering by the tech giant. The decline is attributed to a broader downturn in long-dated debt, rising inflation expectations influenced by geopolitical events like the Iran war, and increased skepticism about the profitability of major technology companies' substantial AI investments.
This sterling-denominated century bond was the first of its kind from a technology firm since the dot-com bubble era. The issuance, which was ten times oversubscribed, initially raised concerns about aggressive AI investment programs. However, concurrent events have pressured the bond. Yields across developed economies have risen, particularly impacting UK government bonds due to energy costs. Inflation and high interest rates negatively affect bond values by demanding higher yields to offset potential erosion of returns. Lana Vaselova of Cbonds noted that 100-year bonds are highly sensitive to interest rate movements, and technology debt has broadly declined this year amid investor caution on AI spending.