This opinion piece was written by Quin Casey and first published by NBR on 1 September 2026. It is reproduced here with permission.

Imagine lending someone a large sum of money today and agreeing not to have it returned until 2056.
Would you do it?

In many ways, thirty years is an eternity. Three decades ago, the internet was a screeching dial-up noise, smartphones were science fiction, and the global financial landscape looked radically different.

Yet every year, governments and a handful of large companies issue 30-year bonds, requiring investors to believe two things: that the monetary unit will broadly retain its purchasing power and that the issuer will remain solvent.

This prompts a question: does lending money to anyone for 30 years make economic sense or is it a complete leap of faith?

Duration and credit risk

At its core, buying a bond is an investment in an issuer’s willingness and ability to repay. The further into the future repayment occurs, the greater the uncertainty of the investment.

For a government bond, that uncertainty comes primarily in the form of duration risk. The longer the maturity, the higher the duration, and the more violent the price reaction to changes in market yields.

A two-year government bond carries minimal duration. If the central bank increases interest rates by 1%, the capital value of the bond takes an easily digestible hit. The bond matures relatively quickly, allowing the investor to roll their capital into higher-yielding assets.

A 30-year bond enjoys no such luxury. With a duration stretching into the high teens or twenties (depending on the coupon rate), a 1% increase in yields can wipe 15% to 20% off the bond's market value.

For corporate bonds, investors face the same duration risk but with an additional consideration: credit risk.
Not only must investors worry about the future level of interest rates, they must also form an opinion about whether the borrower will remain financially healthy over the long run.

The latter is also a difficult judgment as a company that appears dominant today may not even exist in thirty years (an unpleasant “Kodak moment”).

Indeed, successfully investing into 30-year bonds presents a formidable challenge.

Going longer

Yet long-dated bonds are an increasingly important part of global fixed interest markets.

In September 2021, New Zealand joined the relatively exclusive club of sovereign issuers able to borrow for 30 years, launching its first 30-year government bond, maturing in May 2051.
The bond deal was seen as an important extension of the government's funding programme, allowing it to diversify funding sources and provide investors with exposure further along the yield curve.

And the borrowing logic was understandable. Global interest rates were low, while investors were searching for “safe-haven” long-duration assets amid concerns about economic growth in the shadow of the global pandemic.
The 30-year bond carried a coupon of 2.75% and was issued at a yield to maturity of 2.86%.

But what, exactly, underpinned that 2.86% yield?

A two-year government bond has a reasonably obvious anchor. Its yield is heavily influenced by where investors expect the central bank’s policy rate to be over the next two years.

If the OCR is 3% and the market expects it to remain around that level, it is difficult for a two-year government bond to trade at a materially different yield. The short end therefore has a relatively tangible reference point.

A 30-year bond does not. There is no objective central bank policy rate ten, 20, or 30 years from now, nor an obvious path for the policy rate from today over the next 30 years. Instead, the yield on a 30-year government bond reflects the market’s collective assumptions about a whole range of things - inflation, real economic growth, demographics, government debt and fiscal policy, to name just a few.

When looking three decades into the future, collective assumptions can change abruptly causing the price of a long-dated government bond to move sharply higher or lower.

Government vs corporate bonds

So, could lending to a high-quality company for 30 years make more economic sense?

The downside is a corporate bond carries genuine credit risk. Companies fail when business models become obsolete, competition erodes unit economics, or management teams simply put too much debt on the balance sheet.

But the upside is that a company does at least offer an investor something that can be easier to analyse over a long horizon. There are assets on the balance sheet that generate sales, operating profits and cash flow. Investors can debate the durability of those cash flows, but at least they have something tangible to analyse.

This is why a handful of high-quality corporates can issue bonds that mature three decades or more into the future. The current AI investment boom is a case in point. So far in 2026, Amazon, Meta and Alphabet have all issued bonds maturing in 30 years.

Alphabet has gone one step further, issuing a £1 billion sterling bond maturing in 2126 i.e., a 100-year bond. Let’s hope the investors’ due diligence extended beyond a quick Google search of the company’s balance sheet.

Granted, a government also has a balance sheet, but it is arguably more difficult to pick apart. Its public assets sit alongside healthcare, pension, infrastructure and other long-term spending commitments that can be difficult to quantify.

The comparison therefore becomes less about which borrower is “safe” and more about what risks the investor is being paid to take. Ultimately, the relative attractiveness depends on the price paid for the risks embedded in the bond.

Hold to maturity?

There is another peculiarity about a 30-year bond.

A pension fund or insurance company might buy a 30-year government bond because it has long-dated liabilities and intends to hold it to maturity. But most investors - even those with genuinely long-term investment horizons - may have little intention of holding the long-dated bond for the entire 30-year term.

Different investors can buy or sell the same bond for entirely different reasons, each based on a reasonably coherent narrative of how the future might unfold.

One investor sees structurally higher inflation; another emphasises ageing populations; another worries about an unsustainable path for government debt. For a long dated corporate bond, investors may instead form very different narratives about the durability of the company’s competitive advantage.

But a coherent narrative is not necessarily a reliable forecast.

Most buyers of a 30-year bond are not sitting down and coldly calculating the exact value of the cash flows they expect to receive over the next three decades. They are likely considering what another investor might be willing to pay for those cash flows in the future.

A bond held to maturity is fundamentally about contractual cash flows. A bond that is likely to be traded before maturity, by investors with different objectives and investment horizons, is also about market psychology.

And the further out the maturity, the greater the scope for that psychology - rather than fundamentals alone - to influence the price.

In this sense, the long end of the yield curve can resemble an ongoing forecasting competition. Investors are not just trying to anticipate the future; they are trying to anticipate how other investors will interpret the future - the essence of Keynes’ famous “beauty contest”.

For long-dated government bonds, the irony is striking. They are conventionally described as “risk-free”, yet they can simultaneously be among the market’s most heavily traded and speculative instruments.

That is not because a government issuing long-dated bonds in its own currency is likely to default. It is because the price of those bonds can move materially on changing expectations about a future that nobody can forecast with much confidence.

The chart below brings this to life: not many investors anticipated the surge in inflation following the global pandemic, but expectations changed and market yields increased. Consequently, the price of that New Zealand government bond maturing in May 2051 has fallen sharply.

Does it make sense?

So, does lending money to a government or corporate issuer for thirty years make economic sense?

The answer is yes.

But only under the same condition that applies to every other investment: the price must adequately compensate the investor for the risks being taken.

A 30-year government or corporate bond is neither inherently attractive nor inherently unattractive. It is about dealing with the uncertainty that comes with looking far into the future - and weighing probabilities.

Thirty-year bonds simply force investors to confront that reality more directly than other fixed interest assets.

When purchasing a long-dated bond, investors are not merely lending money; they are expressing a view about a future world they cannot see clearly. Sometimes that view will prove correct. Sometimes it won't.

That 2051 bond currently yields 5.36%.

To my mind, that’s good buying. I remain comfortable with New Zealand’s long-term economic and institutional foundations, and believe the yield provides sufficient compensation for the uncertainty that comes with lending money for several decades.

You might have the opposite view, based on a different set of assumptions.

And that’s what makes a market - especially the market for long-dated bonds.

Talk to us

If you’ve got questions about your investment, our friendly team are here to help. You can drop us an email, call us on 0508 347 437, or chat with us online.