The parent of Google Alphabet broke several records at once. The company issued $ 10 billion in bonds – more than ever. Interest in this is lower than ever.
The parent company of the search engine Google is raising new money – with a loan of ten billion US dollars. It was the biggest bond the band had ever issued.
The interest rate on the $ 1 billion five-year corporate bond was only 0.45% – a record high since an Apple corporate bond in 2013. US online retailer Amazon also recently placed bonds worth ten billion dollars. at the lowest interest rates.
If a business needs money, it can issue a bond. It is a fixed income security. Investors can buy this – and thus lend money to the company. In return, investors receive interest. Countries can also finance themselves by issuing bonds – these are called government bonds. There are usually bonds of different lengths, that is, bonds of one, five or ten years.
Retail investors can also invest in bonds
The low interest rate environment is also the monetary policy of the US Federal Reserve (Fed). During the corona crisis, he also bought corporate bonds – which lowered interest rates.
This is a good thing for companies, after all, they can finance themselves so cheaply and – unlike issuing shares, i.e. corporate shares – they don’t have to cede voting rights to investors.
For investors, broad-based, forward-looking corporate bonds like Google are a safe investment – by comparison buy stocks. However, the returns, called yields, are often lower – which is due to the low interest rates.
Retail investors can also invest in bonds. This is done through something called pension funds, in this case pensions are another word for bonds.
Google’s mother wants to use the newly earned money to invest around $ 5.75 billion in social and sustainable projects. According to a blog post from the group, these include investments in energy-efficient buildings or clean energy.
But Google also wants to become more social: 175 million dollars must be invested in start-ups run by blacks. The background is the “BlackLivesMatter” movement in the USA. In addition, the group wants to help small businesses that have particularly suffered from the Corona crisis.
The Corona crisis also affects Google
The remainder, approximately $ 4 billion, will be used for general corporate purposes. After all, the corona pandemic has also affected Alphabet: profit fell from $ 9.95 billion to $ 6.96 billion year-on-year.
Alphabet’s slot machine – Google’s advertising business – suffered a setback during the crisis. For the first time in 22 years of history, revenues fell 8% to $ 29.9 billion.