Saudi Arabia's sovereign wealth fund just issued a 100-year bond as part of a debut, $3 billion bond sale.
The move raised some eyebrows because as central banks tighten policy, the longest-dated debt comes under the most pressure.
That's because longer-dated bonds have a higher duration, a bond-market term that means they are more sensitive to changes in interest rates, according to Christoph Rieger, head of fixed-income research at Commerzbank. This leads to disproportionately large changes in price from the recent rate increases by central banks.
Ireland and Belgium both issued 100-year bonds last year. Those bonds have tumbled in price and are now trading at 54 and 40 cents on the dollar respectively, FactSet data shows.
Ultralong bonds can also be difficult to sell, especially if markets are volatile, analysts said.
"The longer your maturity, the more you have political risk, market risk and liquidity risk," said Sebastien Galy, a macro strategist at Nordea Asset Management. "Liquidity disappears in time of volatility, so you can get stuck with these things for eternity as very few people actually trade them."
For the Saudi century bond, investors said they still saw value in it because it was priced cheaply—substantially below face value, to yield 6.7%—and as high oil prices bolster Saudi finances. The fund sold century bonds with a face value of $500 million.
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