BNP Paribas’s registered head office at 16 boulevard des Italiens in Paris, photographed in December 2022. Credit: Boubloub / CC BY-SA 4.0 via Wikimedia Commons BNP Paribas expects the years-long rally in corporate bonds to break as hyperscalers flood the market, forecasting some $400B of their bond sales next year and a record $3.7T of net fixed income supply. The ECB reached a similar conclusion in August, finding US tech now accounts for close to a tenth of new euro corporate issuance. BNP Paribas expects the years-long rally in corporate bonds to break when technology companies saturate the market with AI debt, Bloomberg reported.
Its analysts put next year’s hyperscaler bond sales at some $400B. “AI is driving credit markets from bond scarcity to bond abundance,” wrote Viktor Hjort, the bank’s global head of credit strategy, and colleagues. It is a reversal. For three years the same desk called credit “yieldy, defensive and under-supplied“. The forecast puts net supply of all fixed income at a record $3.7T next year, with euro investment-grade spreads six basis points wider by the end of 2026 and dollar spreads seven. “Credit is becoming oversupplied at a time when government bonds are too,” the analysts wrote.
Six basis points is not a crisis. It is a price, and European borrowers are the ones paying it. The European Central Bank got there first. Ten days ago it published its own analysis of US tech issuing in euros, counting EUR 40B of hyperscaler bonds outstanding and tech at close to a tenth of gross new euro corporate issuance.
Amazon and Alphabet were the largest euro-area non-financial corporate issuers this year. Its worry is crowding rather than default. Investors have finite balance sheets, and passive funds rebalancing towards index-weighted hyperscalers push other borrowers out mechanically. Its staff put hyperscaler capital spending above $1T by 2028, around 3% of current US output.
TNW reported in July that the five biggest spenders had doubled their debt to about $350B, and that Europe would feel it. What BNP adds is a date. The bank is also in the trade it is warning about. It was one of seven lenders that put $830M behind Mistral in March, for 13,800 Nvidia chips at a data centre south of Paris.
That is the shape of the thing. Europe’s largest AI debt raise of the year is $830M, against $400B of American issuance forecast for next. “We don’t doubt that we will be able to place it, it’s all a question of price,” JPMorgan’s Matthias Reschke said last month of the bond sales. Whose price is the part nobody has settled.
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