Normally, pricier funding pulls bond supply down. For the decade through 2025, investment-grade issuance tended to move opposite borrowing costs, based on Bloomberg data. Not this year. Yields and new supply are climbing together.
So far this year, companies have floated $1.69 trillion of U.S. corporate bonds, about 30% more than a year ago. As of Thursday's close, average yields had increased by roughly 1.2 percentage point to 5.97%, and global investment-grade yields sit near 5.5% - within a half point of their post-financial-crisis peak.
Higher yields are already pinching most issuers. In the U.S. this week, corporations sold $11.4 billion of notes, short of the $25 billion to $30 billion dealers expected. Europe logged €16.2 billion ($18.1 billion), missing even the most bearish forecasts in Bloomberg's weekly survey.
Hyperscalers are the exception. They are borrowing to fund artificial intelligence buildouts, expanding AI infrastructure such as data centers and AI chips, and the profit potential is massive. OpenAI estimates its annualized revenue could hit at least $70 billion before the year concludes.
Barclays' Scott Schulte, the bank's worldwide joint leader for the investment-grade debt syndicate, said, "Capital expenditure from hyperscalers is expected at around $1 trillion next year, which means AI bond issuance isn't going to slow down despite the higher-rate environment." "There's a lot of investor concern about the market's ability to absorb all the supply, especially when several European elections coming up may push global yields higher."
Fresh headlines added fuel this week. According to Bloomberg and other outlets, Elon Musk's SpaceX has been discussing with banks and investors a plan to raise $40 billion to purchase Nvidia Corp. chips, a transaction expected to close next year that would rank among the largest AI-related debt financings. Broadcom Inc. is also mapping out another major deal to help OpenAI purchase custom AI chips they are building together, shortly after Broadcom began amassing $60 billion of AI chip financing for Anthropic PBC and others.
The drumbeat may continue even if these financings slip to next year. In a Sept. 2026 note, Craig Nicol's team at hedge fund Sona Asset Management said a 0.25 to 0.75 percentage point widening in credit spreads would primarily steer hyperscaler issuance to shorter maturities instead of reducing their need for capital.
Tech borrowing at this scale reshapes the entire corporate bond market. Market Briefs covers credit free every morning.
Some pros describe the deluge as "Price-insensitive" supply. Hans Mikkelsen, TD Securities' U.S. credit strategist, highlighted AI and M&A activity and said he expects spreads to widen further to make room for the extra paper.
Risk gauges told a similar story. On Wednesday and Thursday, pricing in credit derivatives and the risk premiums for many tech issuers rose following reports of more blockbuster tech financings. Beyond AI, yields are also being pushed up by heavier government borrowing and revived inflation worries as the U.S.-Iran standoff persists.
Issuers outside Big Tech are pausing. At MUFG, Antoine Baudron, who jointly leads capital markets for EMEA, said, "We have been working on a number of transactions that for now haven't seen the light of day yet because of the sticker shock," adding, "Internally, they are not ready as these are not the levels they were expecting." Over longer stretches, the rolling average of global high-grade issuance has tended to track funding costs, with a lag, per Bloomberg data.
Big Tech is still stepping on the gas while many others are tapping the brakes. With yields around 5.97% as of Thursday's close and global investment-grade near 5.5% after dipping below 5% in early August, investors are staring at a market absorbing more supply from borrowers who are not easily deterred by price. That can tug spreads wider, pull issuance toward shorter maturities, and show up in credit derivatives and bond pricing as the AI buildout brings a steady stream of new deals.
AI infrastructure is being funded with debt, not just cash flow. Get the free Market Briefs daily newsletter and follow it.
