Investors are starting to feel stuffed. "You're seeing that in high yield," Lynam said. Her point: supply is heavy and spreads are widening.
Fresh paper keeps coming. September's U.S. high-yield calendar reached $38.51 billion, the heaviest month this year, including a $10 billion offering from SoftBank Group Corp. And there is more on deck: Paramount Skydance Corp. is seeking to raise $44.4 billion across investment-grade and high-yield bonds this week.
Three ingredients are pressuring spreads right now - a heavy sales slate, an active pipeline into year-end, and higher Treasury yields. Bloomberg index figures show the average additional yield on U.S. high-yield debt rose by 12 basis points to reach 294 basis points as of Friday's close - the highest since April. Lower-quality debt felt it too, with CCC-tier average spreads closing at 968 basis points, the widest since November 2023.
Goldman estimates nearly $600 billion in debt tied to artificial intelligence initiatives has priced across markets so far this year, "which is just an extraordinary number," Lynam said. Roughly 40% of the total ties back to hyperscalers, underscoring how broad the AI-related exposure is. With much of the AI-linked issuance coming from AA and BB names, Goldman's team prefers BBB within investment grade. Looking further out, Lynam said, "We're probably past the peak of supply in 2026 for the AI related theme because there's been a bit of indigestion and fatigue and I think 2027 will be the accelerator."
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For your wallet, this all means yields are enticing but moving targets. More issuance and choppier rates have already nudged credit spreads wider, and that push-pull may keep shaping how much extra yield markets offer for taking on corporate risk.
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