Both investment-grade and high-yield corporate bond markets are seeing record or near-record levels of new issuance. Despite the high volume of supply, demand remains robust, with investment-grade deals being oversubscribed and new issue concessions dropping.
A significant driver of new debt issuance is the immense capital need for the AI build-out, including data centers, chips, and power. Hyperscale tech companies and data center operators are tapping the bond markets to fund these massive, long-term projects.
Analysts express growing concern that inflation is proving stickier than anticipated, citing rising energy prices, climbing producer price indices, and the delayed impact of tariffs. This has led to a significant shift in interest rate expectations, with some forecasting zero Fed cuts for the year.
The US is strategically focused on rebuilding domestic manufacturing and supply chain capabilities in critical technologies to compete with China. Key areas include semiconductors, drones, and critical minerals, which requires overcoming a long-term labor shortage and skills gap.
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