In Credit 27 07 2026

Information for investment professionals

Get Off of My Cloud As hyperscalers remain locked in an AI-funding arms race, are we seeing signs of indigestion in credit markets? Read on for a breakdown of fixed income news across sectors and regions.

Chart of the Week Steven Nelson, Client Portfolio Manager, Investment Grade

The hyperscaler bond market is being driven by something more fundamental than a financing cycle: an AI arms race with no obvious exit. The major technology firms – Microsoft, Alphabet, Amazon, Meta and Oracle – are being compelled to pull forward capital expenditure at an unprecedented pace, with aggregate capex estimates for 2027 now running at almost $1 trillion, a forecast that has doubled in less than a year.

The competitive logic is unforgiving: falling behind on compute capacity today risks ceding market position in AI that may prove impossible to recover. Roughly 20-25% of the funding requirement is being channelled through investment grade (IG) markets and the sheer volume is testing investor capacity, with the technology sector now trading significantly cheap versus broader markets.

On Friday, another $12.3 billion deal was announced to finance a BlackRock-owned, Meta- backed data centre campus. This drew a relatively modest $20 billion of demand. Is indigestion setting in? Investor appetite for AI infrastructure debt is certainly becoming more selective.

Bond issuance by hyperscalers (US$ billion) Apple Amazon Alphabet Meta Microsoft

Source: Bloomberg, Issuance for 2026 covers the period from 1 January 2026 to 27 July 2026

Market dashboard G4 rates G10 FX Ccy Level YDAY MTD YTD 12MO FX Level YDAY MTD YTD 12MO EUR EUR

2 Year GBP GBP JPY JPY USD CAD EUR AUD

5 Year GBP NZD JPY CHF USD NOK EUR SEK

10 Year GBP JPY Key references USD Mkt Level YDAY MTD YTD 12MO EUR DXY

30 Year GBP BRENT JPY GOLD 4, USD BITCOIN 63, SPX 7, Yield-spreads FTSE 10, Mkt Level YDAY MTD YTD 12MO VIX 19 0 2 4 4 US-DE

10 Year UK-DE Credit spreads - OAS, bp FR-DE Mkt Level YDAY MTD YTD 12MO IT-DE Global IG 81 1 3 1 1 USD IG 80 1 6 2 4 Inflation breakevens EUR IG 78 0 -2 0 -3 Market Level YDAY MTD YTD YTD Global HY 288 4 8 -3 -20 France USD HY Italy EUR HY Year Germany EMBI-GD UK US

Source: Bloomberg, Columbia Threadneedle Investments as at 24 July 2026. QTD refers to the period from 30 June 2026. OAS – Option-adjusted spread; Yield spreads are the spreads over German Bunds (DE); DXY – US Dollar Index; SPX – S&P 500 Index; FTSE – FTSE All- Share index. VIX – CBOE Volatility Index; HY – High yield bonds; EMBI-GD – JPMorgan Emerging Markets Bond Index (Global Diversified)

Macro/government bonds Simon Roberts Product Specialist, Global Rates

The dominant market theme last week was the Iran war, and the subsequent pause in the ceasefire from Thursday onwards. Oil prices reflected the recent intensification of bombing by the US on Iranian targets, and the subsequent pause to allow negotiations to take place. The price of a barrel of Brent reached just above US$100 at one point on Thursday before finishing the week at $97. Higher oil prices fed through to higher interest rate expectations. The 10-year US Treasury yield rose by 8 basis points (bps) to 4.68%, while the 10-year gilt yield also climbed 8 bps to 5.03% and the 10-year Bund yield edged up 2 bps to 3.17%.

The US and European yield curves ‘bear flattened’ as short-dated yields rose more than their longer dated peers. The US 2-year Treasury yield rose by 15 bps while the 30-year yield rose by 9 bps over the week. The subsequent cessation in hostilities led to a break in this flattening trend. The magnitude of the bear flattening trend was less pronounced in Europe. While the European Central Bank (ECB) already moved to tighten policy in June, the Federal Reserve has yet to hike rates in this phase of the cycle, with market consensus coalescing around a quarter point rise in September.

The ECB kept rates on hold at 2.25% last week. Messaging had a hawkish tilt with the market fully pricing in a September rate rise.