The 100-year bond rises again

Will investors take a leap on so-called century bonds? Some bankers think so.

By Kim Peterson Aug 24, 2010 3:38PM
Crystal ball © Thinkstock/JupiterimagesThe bond market is so hot that some bankers are betting people will snap up 100-year bonds.

These ultra-long-term bonds are risky because the investor must believe that the companies issuing them will still exist in 100 years, according to The Wall Street Journal. But they're attractive because companies pay investors a premium for them.

"Such bonds won't pay off their principal until 2110, a date so far that the people doing today's buying and selling will all be dead," writes Katy Burne.

The big question mark for these bonds are interest rates. No one has a clue what direction interest rates will take over the next century, and they could rise to a point where they outshine any "century bond" return.

But that isn't stopping some bankers from pitching the idea.

"With credit spreads rallying, it's the perfect environment for issuers to get away with 100-year bonds," one banker told the Journal. "There is a natural trend to go long, so the obvious extension of that is to move past the 30-year bucket."

Companies that have sold century bonds in the past include Walt Disney (DIS), Coca-Cola (KO) and transportation companies Norfolk Southern (NSC) and Burlington Northern Santa Fe. Coupons on these bonds are usually in the 7% to 8% range, Burne writes.

2Comments
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
284
284 rated 2
461
461 rated 3
671
671 rated 4
628
628 rated 5
618
618 rated 6
615
615 rated 7
495
495 rated 8
347
347 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.