Here It Is. Here's The Bursting Of The Bond Bubble

There it is, the bursting of the bond bubble right before our very eyes. At least, in my opinion it is. The

is reporting today that Wall Street investment bankers are pushing investors' limits as they begin to sell 100 year bonds. Hundred-year bonds were in fashion earlier in the 21st century and in the mid to late 1990s when a few dozen companies issued them. Now, with the demand for company debt surging, more companies may begin to offer them. These bonds would pay out principal in 2110, when almost everyone who has purchased them will be dead. Since interest rates are so low and demand for commercial paper so high, corporations are looking at ways to access capital the cheapest way possible. The major drawback and the reason that I say it's the bursting of the bond bubble, is that over the next century, interest rates will inevitably rise. They have nowhere to go but up. "I think it would be a challenge," said Mark Oline, head of U.S. corporate finance at Fitch Ratings. "Given the volatility in world markets, the credit risk of a 100-year bond combined with the expectation that at some point interest rates will rise will probably make buyers shy away from a 100-year security," he said. If 100-year bonds do start to become more and more available, the only realistic buyers would be insurance companies and pension funds. Both of these buyers have continuous obligations as they pay out claims and retirement checks. Some of the companies that have sold 100-year bonds in the past are Anadarko Petroleum Corp.

, Apache Corp.

, Burlington Northern Santa Fe Corp.

, The Walt Disney Co.

, Coca-Cola Enterprises Inc.

, Federal Express Corp.

, Ford Motor Co.

and International Business Machines Corp

. "You need a buyer with a special need and you need special conditions in the bond market. Conditions may be ripe for that," said Ben Garber, economist at Moody's Analytics. Personally, I feel if companies begin to take advantage of this market and start selling 100-year bonds, it could move sentiment away from looking at binging on debt. With that money needing to earn a return somewhere, riskier assets could see a rise. Analyze Any Stock FREE! Click