The bond market is about to get hit with a wave of new debt, and JPMorgan Asset Management portfolio manager Kelsey Berro told Bloomberg Television on Monday that the investment-grade bond market can handle a busy September. She expects companies to issue $175 billion to $250 billion in new debt next month, which would make it one of the heaviest corporate-debt months of the year.
August isn't even over yet. With two weeks left in the month, companies had already sold $157 billion in high-grade bonds. That pace was helped by Alphabet Inc.'s $25 billion offering, plus large deals from AbbVie Inc. and Advanced Micro Devices Inc.
The trend is obvious: firms are taking on significant debt, and most of it funds artificial-intelligence initiatives. Data compiled by Bloomberg News shows businesses have taken on more than $410 billion of debt this year to fund data centers and other AI work.
The scale is hard to wrap your head around. Data centers need serious cash to build, and companies are lining up to borrow it.
Here's the catch: the forecast spans a wide $75 billion gap. That makes life tricky for credit portfolio managers trying to position themselves before the deals hit.
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That uncertainty is what keeps bond managers up at night.
But the worry may be overblown. The reason is simple. "While there has been record supply, there has also been record demand," she said.
The numbers back her up. That's a massive wave of buying, and it has soaked up all that new debt so far.
Not everyone is buying everything, though. Buyers are demanding better prices and becoming pickier about what they buy. Some data-center borrowers are even courting junk-bond investors for debt that would normally be considered investment-grade. That tells you the market is getting selective, not desperate.
Retail investors have been a key part of this demand. Their appetite for high-grade corporate bonds has been unprecedented this year, with purchases already exceeding any full-year total since 2010. That steady inflow of cash has helped absorb the record supply without causing yields to spike or prices to collapse.
Berro's bigger point is about what comes next. If the market absorbs September's issuance without a problem, she says sidelined investors could rush back in. "There will be a rush into the market," she warned.
That sounds counterintuitive, but it makes sense. When everyone is scared of a supply flood, they sit on the sidelines. If the flood never comes, or the market handles it fine, those same investors scramble to get in before prices move. Any sign of stability, and the money comes back fast.
For regular investors, the takeaway is calmer than the headlines suggest. The bond market has absorbed record supply all year, and demand has matched it every step of the way. Berro called the supply worries "not really an issue," and the data supports that read.
What matters for your portfolio is the bigger picture. Companies are borrowing heavily to build AI infrastructure, and that spending is showing up across the debt markets. If demand keeps pace with supply, bond prices stay stable and yields stay attractive. If the borrowing slows, that tells you something about how companies view the economy ahead.
Either way, September will be a telling month. Watch how the deals get absorbed, and you'll learn a lot about where the credit market thinks things are headed.
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