Big lenders are leaning harder on bond markets to fund the AI buildout and the livelier trading that has come with it. Barclays says senior debt issuance hit $50 billion in the third quarter, more than twice the level a year earlier. That cash is helping grease massive AI spending by hyperscalers and tech giants, with projects running into the hundreds of billions at companies from SpaceX to Oracle.
In a Barclays note, Peter Troisi and Ishika Goyal said investors have taken the extra supply "relatively well," and, with bank bond spreads holding steady, issuers have a clear incentive to continue raising funds as AI-related activity ramps. They also noted that delays in some tech IPOs could limit how much supply ultimately hits the market.
Barclays expects all six of the largest U.S. banks to return to the bond market in the fourth quarter to secure funding tied to AI opportunities. Its team estimates a full-year total of $233 billion for those six banks, and across all U.S. banks, it now forecasts $294 billion of senior debt issuance in 2024. That is about 25% higher than its earlier estimate and above the $240 billion projection for 2025.
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Banks usually sell debt after earnings, and that cycle starts next week: Wells Fargo, JPMorgan Chase, Goldman Sachs, and Citigroup report on Oct. 13, with Morgan Stanley and Bank of America following on Oct. 14. Bloomberg Intelligence analyst Arnold Kakuda expects that, among the six, Goldman Sachs and Morgan Stanley - leaders in 2026 issuance - will likely be the busiest borrowers after earnings next week.
Another JPMorgan report projects $24 billion of U.S. bank bond supply in October and notes that Wells Fargo and Citigroup already raised $18 billion in off-cycle issuance last month, including Citigroup's $12 billion sale. "We don't expect issuance from those names post earnings and do believe that Bank of America may also not tap the market - thus the bulk of issuance will be from MS and GS," strategists including Kabir Caprihan wrote Tuesday. One snag: benchmark borrowing costs have risen, and there are fresh signs of credit worries among hyperscalers and other tech borrowers, which could restrain appetite to pile on debt.
If you own bank bonds or track how lenders fund themselves, watch for a busy fourth quarter as firms reload to chase AI-related business. Spreads have been steady, but higher base rates and rumblings around big tech borrowers are worth keeping an eye on. Earnings next week will be a practical cue for who comes to market and how much they try to raise.
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