Most of the time when one thinks of long term bonds, maturity dates 20 or 30 years from now come to mind. Those readers who have been around financial markets are probably aware the U.S Government has been an issuer of 30 year bonds for decades and even the Australian Government has joined the thirty-year club recently. However, there is long term and then there is really long term; fifty years, seventy years or even one hundred years.
One hundred year bonds are not common but they are not exceptionally rare, either. China, the Philippines, Mexico, Austria, Belgium, Ireland all have issued “century” bonds. Even serial defaulter Argentina got one away as in June this year.
It is not just sovereigns which issue the ultra-long bonds. There are also corporate 100 year bonds on issue. Coca Cola, Petrobas and Disney all have them, although Disney’s bond is callable after 30 years in 2023.
The latest century bond issuer is the University of Oxford. Oxford recently received a AAA credit rating from S&P in preparation for its inaugural £750 million (AUD$1.35 billion) bond sale. The bonds mature in December 2117 and have a 2.544% coupon. According to Westpac, they were priced at U.K treasury bonds + 85bps (although it is a bit of a mystery as to which maturity Treasury bond the comparison was made).
Initially Oxford sought to raise £250 million (AUD$450 million) but demand was strong enough for the investment banks arranging the deal to triple the size. With yields at record low levels, one can see why an issuer may be tempted to issue such a long-dated bond, especially in the last few years. Here’s a chart of yields on 100 year bonds over time from the Federal Reserve Bank of St. Louis.
(source: U.S. Department of the Treasury. Corporate bond spot rate, Federal Reserve Bank of St. Louis)