Washington: Artificial intelligence (AI) spending and the growth of the private credit market aren’t just spurring companies to borrow more, they’re also helping to generate fresh records for corporate-bond trading.
An average of US$50bil in investment-grade and high-yield bonds changed hands each trading day last year, according to Crisil Coalition Greenwich, a provider of research and data for the financial services industry.
That marked a record level, up from US$46bil in 2024, the latest in a string of records as the market benefits from longer-term changes like growing electronic trading. A big chunk of trading comes from new bond sales, which often lead investors to sell a company’s older debt and buy fresh securities.
Dealers including Morgan Stanley and JPMorgan Chase & Co expect record issuance for high-grade US corporate debt this year, fuelled in part by companies funding investments in AI infrastructure, like building data centres.
Some of the borrowing for those investments is happening in private markets, as when Meta Platforms Inc and Blue Owl Capital Inc raised about US$27bil of high-grade debt for a data centre in rural Louisiana last year.
That in turn can spur more trading in private credit, where investors are increasingly looking for ways to sell out of positions, said Rehan Latif, global head of credit trading at Morgan Stanley.
“I view it very much as the biggest single opportunity coming into this year,” said Latif in an interview.
“Every single time a new market is created, there is a little bit of a lag before the secondary market kicks off. The reality is this is the right time for it to happen.”
The longer-dated bonds that tech companies and utilities often sell to help fund investments tied to AI can also spur more trading, according to Citadel Securities credit rating global head Sam Berberian and investment-grade desk analyst head Jeff Eason.
Prices on these bonds tend to swing more as the yield curve shifts, making the securities more interesting to hedge funds and other investors that trade actively in the market. As companies borrow more for AI projects, investors are being forced to work harder to make sure they don’t have too much exposure to tech companies and utilities across their portfolios. — Bloomberg
