Alphabet issued a rare 100-year sterling bond to fund a massive AI buildout. The company raised $20 billion in a US dollar bond sale with strong demand, prompting an upsizing to $100 billion. London saw a twist when Alphabet debuted a sterling century bond worth around £1 billion.
This move comes as Alphabet plans to spend up to $185 billion on AI-related capital expenditures this year. With $46.5 billion in long-term debt and $125 billion in cash, the company seeks funding terms that maintain flexibility amid the AI arms race.
Alphabet’s issuance of a sterling century bond shifts currency risk to others. This move allows the company to leverage the demand for long-duration sterling assets, offering a scarce product to UK pension funds and insurers.
By converting the sterling liability into a synthetic dollar liability through cross currency swaps, Alphabet can secure cheaper funding than issuing solely in dollars. This strategy serves as a subtle wager against sterling, providing advantages if the sterling weakens over time.
The 100-year bond’s maturity poses significant duration risk, with Alphabet leveraging market dynamics where maturity length is prioritized over volatility. The move also reflects a strategic choice to harvest a currency risk premium in the UK market.
Alphabet’s multi-currency issuance strategy signals a shift in Big Tech financing towards sovereign-style infrastructure spending. The company aims to avoid saturating any single market and keep spreads from widening under repeated supply.
Observers should monitor the pricing of the century bond relative to gilts and its demand during execution. A strong demand would indicate that UK long-duration buyers are willing to absorb high-grade supply with a long maturity from a pristine issuer.
If Alphabet’s move becomes a trend among US tech issuers, it would signal a structural value in the sterling market. This could turn sterling ultralong funding into a common lane for AI financing, rather than an anomaly.
Read more at Yahoo Finance: Alphabet’s Century Bond is a Quiet Wager Against Sterling