In bond markets, Alphabet (Google) kicked the week off with nearly $32 billion in multi-currency bond sales, diversifying funding sources across USD, Swiss Francs (CHF) and Pound Sterling (GBP), which included a historic 100-year maturity century bond—not witnessed since the .com era. The broader theme of technology giants turning to debt markets to raise hundreds of billions to fund AI projects and infrastructure continued, following Oracle’s prior week USD$ 25 billion bond sale and OpenAI seeking to raise US$100 billion in a new funding round. In other news, a stronger-than-expected US jobs report and weaker-than-expected inflation pushed back Federal Reserve rate cut expectations to June. The most recent report from the US Treasury indicates Chinese holdings of US government bonds dropped to their lowest levels since 2008. This places China as the third-largest holder of US debt behind Japan and the UK. Lastly, political developments in Japan helped stabilize longer-term Japanese Government Bond (JGB) prices.

Alphabet's historic, 100-year maturity, GBP denominated century bond was a headline focus for investors. Despite being issued during a period of UK political uncertainty and rising government debt, the £1 billion bond, rated AA+, which is a higher rating than the UK government, was met with outsized demand. It offered a 6.125% annual coupon and a premium of approximately 1.20% above the closest 50-year UK government bond. This issue was significant, as the last investment-grade century bond was issued by Motorola in 1997. While investors acknowledged the challenge of predicting the AI/tech landscape over 100 years, the bond's ultra-long duration appealed strongly to institutional investors, such as pension and life-insurance funds, who favour high-grade, long-term debt to match their liabilities, underscoring the extensive lengths technology companies are going to in order to fund massive AI infrastructure spending.

More globally, regulators in China reportedly urged banks to reduce holdings of US treasury bonds, as the US Department of Treasury data showed Chinese holding of treasuries dropped to the lowest level since 2008. Sustained Chinese selling pressure on US government bonds has broader global interest rate implications, prompting discussion over whether China will pursue a slow, gradual sale or a faster, larger-scale, approach. When a large treasury bond holder such as China offloads Treasuries, the supply of these bonds increases, causing their price to fall and their interest rate (yield) to rise, all else equal. Meanwhile, Japanese Government Bonds (JGBs) performed better than expected following a landslide election win and a clearer fiscal spending path. Japan’s finance minister also suggested they wouldn’t sell new bonds to fill fiscal spending gaps, providing bond investors some support. The Japanese yen strengthened nearly 3% against the USD, which further uplifted Japanese yen denominated bond returns.