What should investors make of century bonds?

New 100-year bond has generated plenty of conversation given the rarity of ‘century’ bonds. The most recent sterling example is Alphabet*, which recently issued not just a 100-year bond but five bonds ranging in maturity from three to 100 years. Some of the other recent 100-year issuance has been from universities, charities, quasi-governments and sovereign states e.g. Mexico, EDF, University of Oxford and Wellcome Trust*.

The 100-year Alphabet bond was 10x oversubscribed. We believe this likely reflects two factors: 

(1) investors may view the bond as attractive on a risk-adjusted basis, and (2) given the liability profiles of institutional investors, there is structural demand and limited supply for ultra-long sterling credit.

A buy-and-maintain perspective

A core element of a buy-and-maintain approach is liability awareness. The cashflows for these 100-year maturity bonds extend well beyond the liability profiles we are ultimately managing against for the majority of our clients.

A buy-and-maintain philosophy is also typically to invest for the long term, ideally holding positions to maturity; therefore, we typically do not allocate to ultra-long maturities, because it’s challenging to forecast any corporate, economic or technological conditions with sufficient confidence over a 100‑year horizon.

Here are some of the other interesting aspects of the recent Alphabet issuance, and how it sits within the broader wave of likely hyperscaler issuance expected to shape credit markets in 2026:

1. Duration: longer-dated, but limited additional interest-rate sensitivity

With a 6.125% coupon, its duration is around two years longer than the 30-year tranche issued at the same time. This means that extending from 30 to 100 years until maturity represents a modest increase in interest-rate sensitivity.

2. Spread versus yield given the inverted gilt yield curve

The inverted UK government bond yield curve at the very long end means that longer maturity bonds offer diminishing yields. 

• The 100-year was offered at a yield of 6.125% which was 120bps above the 2073 gilt yield 
• The 30-year priced at a yield of 5.875% or 60bps above the 2057 gilt yield

3. Index inclusion impact: 

At £1 billion, Alphabet’s century bond will mechanically become a material constituent of long-duration sterling credit indices. Combined with the other four tranches of Alphabet’s £5.5 billion sterling deal, the weight within benchmarks is significant and Alphabet now stands as one of the largest issuers in the iBoxx non-gilts indices – particularly those with longer maturity profiles.

4. We expect hyperscaler issuance to continue throughout the year

In our view, Alphabet’s issuance forms part of a much wider funding trend. Across the hyperscalers, roughly $57bn (dollar equivalent) has been issued year-to-date against our analyst’s expectations of $130–150bn for 2026, implying a further $70–90bn still to come.

One emerging theme is diversification[1] beyond USD funding which Alphabet may have set the tone for by issuing across three currencies, including five bond maturities in CHF and GBP, in addition to seven bond maturities in USD. 

Amazon* recently launched a very large corporate bond sale across both EUR and USD currencies. We expect other issuers to follow suit and aim to retain flexibility to evaluate opportunities

With hyperscaler funding expected to remain heavy through 2026, maintaining flexibility and diversification remains central to our approach so we can continue to selectively allocate to hyperscalers, considering deals on a case-by-case basis.

 

The value of an investment and any income taken from it is not guaranteed and can go down as well as up, and the investor may get back less than the original amount invested. Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.

* For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an L&G portfolio. The above information does not constitute a recommendation to buy or sell any security.

[1] It should be noted that diversification is no guarantee against a loss in a declining market.