Alphabet's century bond loses 7% amid Iran war and tech slowdown

Alphabet's historic 100-year bond has lost more than 7% of its value in just five months, driven by a broader downturn in long-dated debt and growing scepticism over the earnings potential of major US technology companies.

Bond Performance Since Issuance

The sterling-denominated century bond—which the Google parent company will not need to repay until 2126—has sold off sharply since its issuance in February. The decline occurred before the onset of the Iran conflict and a slowdown in the so-called "Magnificent 7" stocks took hold.

Market Impact and Context

Alphabet sent shockwaves through London's fixed-income sector when it announced plans to raise £1 billion as part of a $32 billion (£23.9 billion) bond issuance via a century bond on the London Stock Exchange's corporate bond market.

This super-long-dated security was the first of its kind from a technology company since the dot-com bubble of the late 1990s, when IBM and Motorola both raised debt on a 100-year horizon. In the UK, only Oxford University, the Wellcome Trust, and French energy giant EDF have previously issued century bonds in sterling.

Factors Behind the Decline

The unusual note—which was 10 times oversubscribed at auction—initially stoked fears that the historic artificial intelligence investment programmes announced by the world's largest tech firms had become too ambitious. It was also viewed as a boost for London's credit market, which has avoided the well-documented difficulties faced by the capital's stock market.

However, the bond has come under considerable pressure from two simultaneous cross-currents:

• The Iran conflict: Since Alphabet issued the coupon, the Middle East conflict has caused investors to reappraise their long-term inflation expectations—a major factor in how they price long-dated debt.
• Big tech slowdown: Yields across developed economies have climbed dramatically since the US's first strike in late February, including in sovereign bonds.

Long-term debt in the UK—particularly in the government's embattled gilt market—has come under particular stress due to Britain's reliance on imported energy and high electricity costs.

Impact of Inflation and Interest Rates

Inflation and high interest rates are particularly damaging to bond values, as investors demand a premium to reflect the higher likelihood of sustained price rises eroding their returns.

"The decline isn't entirely surprising—a 100-year bond carries extreme sensitivity to interest rate moves," said Lana Vaselova, a manager at Cbonds. "Which is precisely what made it attractive when rates looked set to fall."

Vaselova added that technology debt has "almost universally lost value" this year, signalling that investors are casting an extra layer of scepticism over the sector's vast AI investment plans. The so-called Magnificent 7—a group of New York-listed tech juggernauts—have traded flat through much of this year, a dramatic slowdown from a period of astronomic share price gains in recent history.