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Thirty years later, Google has become part of the furniture as it doesn’t exist yet. To show off this fact, parent company Alphabet has recently done what it normally is a protection for businesses that it expects to exist for a long time.
This month’s Internet Search Group’s debt sales have been in five years. The longest paper is not scheduled until 2065. By then, the US population will be nearly 400mn, with pop icon Taylor Swift reaching 75. In addition to tapping the US market, Alphabet raised the first ever euro bond, totaling 6.75 billion euros.
Tech companies are not strangers to far-reaching. IBM issued 100-year bonds in 1996. Microsoft, Amazon, Apple and Intel are the people who sell 40 years of papers. Alphabet’s new 40-year bond is second. Last November, gaming app ad broker Applovin sold a $550 million senior notebook in 2054.
Raising funds in Europe adds a new twist. Again, IBM and Microsoft have been here before. However, market conditions have revived the “reverse yankee” trade in which US companies issue debts in the European market. This has globalist logic. Companies like Alphabet have business and revenue all over the world. Why are there no debt in the same currency when some customers pay in euros?
More importantly, Europe feels cheap as American tourists pack the Louvre and learn while peering through the Mona Lisa. The 2.25 percentage point gap between central bank overnight rates in two markets is twice the average for this century. According to PWC data, the Reverse Yankees are 30% of the Euro issue this year. Usually it’s under 20%.
This in part reflects the imbalance between supply and demand for long-term assets. Insurance companies want to accumulate Set and Forget investments that match their distant liabilities. Investors also try to broaden the risks of the sector. Alphabet is the only US high-tech company to publish Europaper over 20 years from now, based on LEX analysis of LSEG data.
Other big destroyers could follow the example of Alphabet. The perceived stay power manifested through a well-developed bond curve is a useful badge for businesses investing hundreds of billions in debt-funded artificial intelligence data centers. Lenders are happy to tip, but ideally, customers at those data facilities want to know that, if not as solid as the sovereign borrowers, they are as good as what they say.
But ultimately, as IBM’s century bonds returned back then, reverse Yankee bonds are status symbols. The alphabet does not require money. Not the other members of the so-called magnificent Seven. But expect more of these massive tech bonds. This hopes to convey the shaking Pantheon membership to the global capital market. Growing like WhippersNapper is all going well and good. Few companies can simultaneously draw out gravity.
john.foley@ft.com
