Credit calm masks a trillion-dollar AI issuance wave
By Janaka Ariyasena, HY Credit Trader and Portfolio Manager. Ex Seaport Europe and Rubrics Asset Management.
Credit markets have absorbed a relentless supply wave with notable composure, AI-driven issuance sent $ IG volume past $1 trillion in June, running well ahead of last year’s pace. Private credit friction, accelerating e-trading adoption, and the UK Consolidated Tape going live on 22 June complete a busy picture for fixed income participants.
A blowout NFP print and a higher-than-expected CPI reading pushed UST yields higher, yet credit markets remained largely sanguine. IG spreads are at multi-decade lows, but investors continue absorbing supply, attracted by elevated all-in yields, with the Treasury component doing much of the heavy lifting. US HY spreads are not far from cycle tights, likely reflecting an index mostly composed of higher-quality BBs alongside a supportive earnings backdrop. AI-related issuance has helped push YTD $ IG issuance volume to over $1 trillion, running ~25% ahead of 2025’s pace with Hyperscaler/AI issuance making up ~10% of that YTD. The demand for capital has become so large that US companies are issuing in other currency markets across IG and HY. Amazon priced a C$14 billion five-part maple bond deal on 9 June, the largest corporate bond offering ever in the Canadian market, eclipsing Alphabet’s own record of C$8.5 billion set just the month before. Meanwhile, Coreweave issued the first Euro Denominated HY bond for a US Hyperscaler/AI company. The €2bn issue was said to be more than 3.5x covered and traded up 1pt on the break.
The retail-facing private credit complex continues to generate headlines. Several funds gated redemptions after withdrawal requests exceeded caps. Meanwhile, there were new Institutional Fund Raises for private credit strategies and certain BDCs have successfully raised money in IG and HY markets. Blue Owl’s OCIC raised $500 million in a five-year IG bond and FS KKR Capital Corp, a BDC priced a $900 million 7.5% due 2031 upsized from an initial target of ~$400 million after attracting $1.5 billion of demand.
Q1 reports from the large listed E-Trading platforms continue to show increasing adoption of electronic trading, portfolio trading and trade automation. The platforms were vocal about their own AI capabilities built on their own proprietary data. Bank CEOs have also been espousing the benefits of A.I and many are implementing major top-down directives to get their workforce to use the technology to improve productivity, efficiency and profitability amongst other things. On the ground, it is apparent that many Fixed Income Traders are “vibe-coding” their own solutions for day-to-day trading tasks without a developer, made possible by a range of A.I Coding tools. At some point, senior managers will need to confront a number of issues to do with the adoption of A.I such as; balancing headcount costs versus token costs and managing individually created trading solutions vs firmwide trading solutions.
Across the Atlantic, the UK’s long-awaited Consolidated Tape goes live on June 22nd, effectively the FCA’s equivalent of FINRA’s TRACE. On the continent, ESMA’s bond tape is currently in the authorisation phase, and likely to go-live in 2027. Centralised post-trade data will benefit buy-side participants in a number of ways; for example more firm prices in odd lots, tighter bid-ask spreads in less liquid securities and more reliable valuations. How quickly those benefits translate into practice will depend on a number of factors, such as what the output from the new tape looks like, how different participants choose to use the new data and how much trading occurs while the World Cup is going on this Summer!
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