Switzerland’s bond market has traditionally been a niche in which international issuers could achieve a little extra investor diversifcation at a little saving to their home market. But Alphabet showed this week that Swissie investors can swallow a whole load of bonds when they want to, which will put other hyperscalers on alert.
The tech giant priced a whopping Sfr3.055bn ($3.97bn) of fresh debt across five tranches in one go, the biggest ever sale by a foreign corporate borrower.
None of the tranches qualified as a Matterhorn — a Sfr1bn bond from a foreign issuer — but this week's action certainly put the Alp in Alphabet.
The deal hit the market less than a week after Alphabet said its capital expenditure will reach as much as $185bn this year, roughly double what it spent last year, to finance its AI ambitions.
CreditSights analysts have raised their forecasts for AI capex among the five biggest hyperscalers — Oracle, Meta, Google, Amazon and Alphabet — to $750bn this year. Much of that will need to be funded across international bond markets.
Hyperscalers will keep coming with deals, and they will keep coming big. They have tapped the euro and sterling markets in addition to their home market in dollars. But this week's Swiss sale opened up a new possible source of capital, turning what may have been seen as a small corner of the bond market into one that can hold its own against sterling and Australian dollars in terms of the liquidity on offer.
The low coupons issuers can pay there help. The central bank rate is stuck at zero and could turn negative once more if the franc stays strong.
The question is whether Swiss investors keep waving through mega prints, or whether they become more conservative issuance ramps up.
Hyperscalers should treat Swiss franc issuance as a strategic option, not a novelty. But all participants should go carefully if all the hyperscalers are to follow Alphabet's lead.