In order to in artificial intelligence In the race to stay ahead in the (AI) field, tech giants need massive amounts of capital to fund their ambitions, sparking a "bond issuance frenzy." This has raised concerns that the rapid expansion of the debt sector could ultimately lead to a massive sell-off.
At a European credit market conference in London on Thursday, attendees said concerns about a credit market oversupply caused by large-scale bond issuances by tech giants like Meta and Google's parent company Alphabet were premature.
According to relevant data, Alphabet raised $17.5 billion in the US and €6.5 billion (approximately $7.5 billion) in Europe, ranking second in the region's corporate fundraising this year; Meta issued $30 billion in bonds, and Oracle... The company issued $18 billion in bonds.
Morgan Stanley It was previously pointed out that by 2028, technology companies are expected to fund AI and data centers. The expansion of this sector could lead to bond issuance of up to $1.5 trillion. Given the recent volatility in tech stocks, this figure could widen bond spreads across the market. Bond buyers are beginning to worry about whether they will be adequately compensated for the bubble risks in this sector.
However, JPMorgan Chase Iain Stealey, chief investment officer of international fixed income at JP Morgan Asset Management, said the sell-off caused some "shock and temporary indigestion," which he believes widened investment-grade bond spreads by about 10 basis points. However, he stated at the meeting that the concerns were somewhat excessive.
“Yes, the amount of bond issuance is indeed large, but these are from large companies that generate substantial revenue every year. It's not time for us to be overly concerned. In fact, some recent deals offer attractive terms, making them very appealing investment opportunities, especially considering the high creditworthiness of these issuers,” he added.
Stealey believes that future bond supply should be more evenly distributed. He said that Meta has indicated it may not issue bonds again until the second half of next year.
Furthermore, Mahesh Bhimalingam, Global Head of Credit Strategy at BI, stated that large tech companies have extremely low debt levels, making them highly attractive for credit. He pointed out that Alphabet's credit rating is even higher than that of France, while Apple... and Microsoft Other companies that enter the European market will also stand out among many highly rated companies.
Overall, speakers at the meeting were optimistic about credit, believing that interest rate spreads and healthy balance sheets would provide support in 2026.
Ashwin Palta, Global High Yield Portfolio Manager at BNY Investments Newton, said: “Yields remain very attractive, making quality improvement a sensible strategy. At this level of risk, you get adequate compensation, while lower-quality firms don’t offer enough spreads to justify lowering the credit curve.”
He added that Additional Tier 1 (AT1), Restricted Tier 1, and hybrid bonds look attractive. AT1 bonds have been among the strongest performing bonds this year so far, and in a subsequent panel discussion on the topic, speakers said they expect this trend to continue into 2026.
“We may be at the peak of asset quality, but we started from a relatively good point, so I would say ‘basically unchanged’,” said Filippo Maria Alloatti, head of financial credit at Federated Hermes.
(Article source: CLS)
