- Alphabet is back in the euro market. The Google parent is set to raise €6 billion ($6.7 billion) in its second euro bond sale this year through a seven-part deal with maturities from two to 19 years, according to Bloomberg. Investors placed more than €17.1 billion of orders, with demand focused on the longest tranche.
- Buyers are getting paid more. Alphabet is paying wider spreads across the entire sale than in its May offering, and its existing euro bonds have widened as much as 0.6 percentage point since they started trading. Pricing was tightened by at least 20 basis points during book-building, with the two-year fixed-rate portion set at 40 basis points over mid-swaps and the 19-year slice at 185 basis points over.
- The new-issue premium is unusually rich. Alphabet is still offering an average of nearly 24 basis points of concessions across the fixed-rate bonds, about three times the average premium offered by corporates in the euro market this year, based on Bloomberg-compiled data. TwentyFour Asset Management’s Jack Daley said pricing started “at triple-B levels for what is a double-A credit currently.”
- It is set to be a record year. The deal would make Alphabet the biggest corporate issuer of euro debt in a single calendar year after its €9 billion, six-tranche sale in May, topping the record held by Amazon, which raised €14.5 billion in March.
What Happened?
Alphabet launched the seven-part euro offering on Monday, with Barclays, BNP Paribas and Deutsche Bank arranging a deal that was expected to price later in the day. It is the first time a hyperscaler has tapped the euro bond market since Alphabet’s own sale in May. The timing is tough: Alphabet’s market value plunged by a record last week on disappointing search and advertising sales, and on Friday contracts protecting against a default on its debt jumped 6.4 basis points, a record daily increase in absolute terms, to an all-time high of almost 91 basis points. Its existing euro bonds are rated Aa2 by Moody’s, the third-highest investment grade.
Why It Matters?
The deal is a real-time gauge of how much bond investors will charge to fund the AI buildout. Hyperscalers have been issuing debt at a record pace even as investors question whether their AI bets will pay off, and Alphabet, Meta, Microsoft, Amazon and Oracle have committed more than $3 trillion in spending over the coming years. Alphabet kept its 2026 capital-spending outlook at as much as $205 billion last week. Some managers see value: “Fundamentally they are still a strong credit,” Daley said. Others are stepping back, with Rathbones’ Bryn Jones saying, “The spreads just keep widening and they keep issuing,” and that he needs to see returns improve or issuance slow before getting more involved.
What’s Next?
Watch the final pricing and how the new bonds trade in the secondary market, which will show whether the hefty concession was enough. More supply is coming: Oracle announced a $10 billion six-part bond sale in the US on Monday, and Microsoft sold $25 billion last week in a deal that drew more than four times demand. Credit default swap spreads on hyperscalers, which have widened more than the broader index this year, will signal whether investors are growing more or less nervous about AI debt.
Affected Tickers and Coins: GOOGL, AMZN, MSFT, ORCL, LQD
Source: Bloomberg
