The £1bn 100-year bond issued by Alphabet on the London Stock Exchange has lost over £72m (£73.3m) in value since its issue in February this year, a decline of more than 7%. This sharp sell-off serves as a stark reminder that even some of the world's largest and most stable companies are not immune to market turmoil.
The bond, part of a global offering worth $32bn (£23.9bn), was touted as a landmark issue in London's fixed income market when it was first announced. However, the initial optimism surrounding its launch has given way to growing concerns about long-term inflation expectations and their impact on investor returns.
Industry analysts point out that 100-year bonds are extremely sensitive to interest rate movements, making them vulnerable in times of economic uncertainty. The UK's gilt market, which has struggled with high inflation and rising electricity costs, is a case in point. Yields across developed economies have climbed significantly since late February, reducing the appeal of long-term debt instruments.
The 'Magnificent 7' group of New York-listed tech companies, which includes Alphabet, have seen their share prices largely trade flat this year, indicating a growing investor scepticism about their ambitious artificial intelligence investment programmes. The broader market sentiment is that investors are reassessing the value of long-term debt in an environment of rising inflation and geopolitical instability.
The bond's performance underscores the challenges facing both the fixed income market and the technology sector. While its initial oversubscription at auction suggested strong investor appetite, the subsequent shifts in global economic conditions have highlighted the inherent risks associated with ultra-long-term investments.