Inside the Biggest Bond Boom in Years

The historic wave of bond issuance is being absorbed unevenly, with strong demand for investment-grade credit but growing stress and dispersion in lower-quality debt.

• Investment-grade debt volumes are up almost 25% year on year, driven by AI capital expenditure and a resurgence in mergers and acquisitions.
• Around $100 billion of new cash has entered investment-grade credit, supported by insurers, annuity-related capital and private-credit investors responding to higher yields.
• Investment-grade credit is benefiting from strong global and US growth, while CCC debt faces refinancing challenges and increasing dispersion among issuers.
• AI financing is becoming more complex because hyperscalers, chipmakers, neoclouds and data centers are interconnected, prompting issuers to use new structures, currencies and products.
• Higher rates have so far had limited effect on AI borrowers, which remain optimistic about long-term returns; M&A is also recovering as buyers and sellers converge on valuations, while transactions can repay multi-billion-dollar leveraged-finance debt complexes.
• Over the next six to twelve months, energy prices, sticky inflation, fiscal concerns and political developments could widen the gap between disciplined governments, jurisdictions and companies and those with weaker policies.

Takeaway: Credit conditions remain constructive for investment grade but are much less forgiving for distressed and CCC borrowers; investors should focus on issuer quality, refinancing capacity, growth exposure and policy discipline while recognizing that the economic effects of the AI investment cycle remain uncertain.