Alphabet’s Century Bond is a Quiet Wager Against Sterling

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THE GIST

Alphabet has served up a rare 100-year bond in sterling as part of a multi-currency borrowing blitz designed to fund a massive AI buildout.

On the surface, it is just smart liability management and investor base diversification. Under the hood, it looks a lot like a soft bet that sterling funding is cheap today and may look even cheaper tomorrow.

WHAT HAPPENED

Alphabet kicked off the week with a $20 billion US dollar bond sale that was reportedly swamped with demand, drawing more than $100 billion of orders and prompting an upsizing from an initial plan around $15 billion. The deal was split into multiple tranches, with the longest a 40-year bond maturing in 2066, and the strongest demand at the short end where spreads tightened sharply.

Then came the plot twist for London credit nerds. Alphabet lined up a debut sterling issuance that includes a century bond, with market chatter putting the ultra long piece around £1 billion. A Swiss franc deal is also in the mix, turning this into a global shopping trip across the deepest pockets of long duration demand.

This is happening in the context of a capital-spending shock. Alphabet has signalled up to $185 billion of AI-related capex this year, roughly double the prior year, as it pours money into Gemini and cloud infrastructure. Long-term debt has already expanded to about $46.5 billion, even as the company sits on roughly $125 billion in cash.

In other words, Alphabet does not need money in the survival sense. It wants money on terms that keep optionality high while the AI arms race burns cash at industrial scale.

WHY IT MATTERS

A sterling century bond from a US tech giant is not just a funding flex. It is a transaction that shifts risk, particularly currency risk, onto someone else.

Start with the basic corporate finance logic. Alphabet’s core cash flows are overwhelmingly US dollar and global but not sterling-dominated. Issuing debt in a currency you do not earn is rarely about matching liabilities to revenues. It is usually about price.

Sterling long-dated markets have a specific buyer base. UK pension funds and insurers often want very long-duration assets to match long-dated liabilities. That structural demand can make sterling ultralong funding comparatively attractive, especially when a marquee issuer turns up with a scarce product. A 100 year bond is scarcity squared.

Now add the next step that does not show up in the headline. A US issuer that raises £1 billion does not have to keep it in pounds. It can swap the proceeds back into dollars using cross currency swaps, effectively converting the sterling liability into a synthetic dollar liability. In that structure, the investor holds the sterling exposure and Alphabet ends up paying something closer to a dollar rate, plus or minus the basis.

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If that basis is favourable, the company locks in cheaper funding than it could get by issuing only in dollars. If sterling weakens over time, that helps too, because the economic value of those sterling payments falls when translated back into dollars, whether directly through operations or indirectly through hedging economics.

That is why this looks like a wager against sterling, even if nobody will call it that on an earnings call.

The maturity matters as well. A 100 year bond pushes duration risk to absurd levels. Small moves in UK rates can produce big price swings, which is fine if you are a liability driven buyer planning to hold, but brutal if you are trading. Alphabet is taking advantage of a market microstructure quirk where some buyers prize maturity length more than they fear volatility.

There is also a macro layer. The UK has spent years living with a currency risk premium that flares when politics or fiscal credibility wobble. A global issuer selling sterling paper is implicitly saying the premium is worth harvesting. It is the corporate version of picking up yield in a currency that still carries a question mark.

Crucially, this is not about Alphabet calling a sterling collapse. It is more subtle. It is about locking in a funding option that looks cheap relative to alternatives and letting time do the rest. If sterling stays flat, Alphabet still wins if the all in cost is lower than dollar funding. If sterling weakens, the optics get even better.

The risk is the mirror image. If sterling strengthens materially, or if UK rates rise and stay high, the relative attractiveness of the trade diminishes. If Alphabet does not hedge fully, stronger sterling makes servicing the debt more expensive in dollar terms. If it hedges, the cross currency basis can move against it over time. Either way, the trade is not free. It is just a well designed asymmetry.

This is also a signal about Big Tech financing behaviour. The AI buildout is starting to look less like a normal capex cycle and more like sovereign style infrastructure spending, funded across every liquid market that will write a big check. Multi-currency issuance is a way to avoid saturating any single market and to keep spreads from widening under the weight of repeated supply.

WHAT’S NEXT

Watch the pricing. The real story will be where the century bond clears versus gilts and how much it tightens during execution. Strong demand would confirm that UK long-duration buyers will absorb almost any high-grade supply if the maturity is long enough and the issuer is pristine.

Then watch what Alphabet does next. If this becomes a repeat play rather than a one-off novelty, it tells you the company believes the sterling window is structurally valuable. If peers follow, sterling ultralong could become an AI funding lane, not a curiosity.

Finally, keep an eye on the currency subtext. If more US tech issuers start raising in sterling and swapping out, it is a quiet market vote that UK capital is cheap, sterling risk is priced, and global borrowers are happy to let UK investors wear it.

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