Century Bonds: A Long Term Bet On Google

Google’s parent, Alphabet, just issued $32 billion in global debt, including £1 billion of rare century bonds. Alphabet’s century bonds are called such because they do not mature for 100 years (2126). While the century bond is a small piece of its recent debt offering and even less of its outstanding debt ($78 billion), the tranche secures ultra-long-term capital for a long time. On the small piece of debt, Alphabet insulates itself from future interest-rate cycles and the need to refinance debt at maturity.

Century bonds are typically issued when companies can borrow cheaply and, importantly, when investors are confident in the issuer’s durability. Buyers must believe the issuer will still be solvent 100 years from now. The strong demand for its century bonds, as evidenced by orders reportedly several times the offering size, signals that long-term institutional investors such as pension funds and insurance companies are bullish on Google’s prospects.

What…