Alphabet's Century Bond Falls Below Par Value as Market Concerns Grow

Alphabet's century bond has hit a milestone in the pound sterling market. The tech giant issued a 1 billion pound ($1.34 billion USD) bond in February with a maturity date of 2126, which has now fallen below 90 pence per pound face value for the first time.

The price of this 100-year bond closed at 89.978 pence on Thursday, July 24. When it was issued earlier this year as part of large-scale global bond issuance, Alphabet's century bond had a credit spread over the risk-free benchmark rate that reached as high as 139.8 basis points.

This bond has been facing twofold pressure: market concerns about AI-related bond issuance and rising government bond yields due to resurfacing fiscal deficit and inflation worries. The modified duration of this very long bond means a 1 percentage point increase in yield could result in nearly a 15 pence fall in its price.

Meanwhile, UniCredit credit strategist Michael Teig noted that the credit spreads of hyperscale cloud service provider bonds have widened recently. This has sparked debate among investors about the viability of these business models, especially considering their massive scale of capital expenditures.