Original Author: Xu Chao

Original Source: Wall Street Watch

As the US Treasury market takes a brief breath, a bigger stress test is quietly approaching.

The US Treasury Department announced yesterday an expansion of the long-term Treasury bond repurchase program, temporarily easing market tensions as the yield on the 30-year Treasury bond broke above 5.3%. However, market participants warn that the effects of this intervention may not last long—the AI infrastructure financing wave driven by tech giants is set to surge after Labor Day in September, when US investment-grade corporate bond issuance is expected to reach $200 billion, potentially posing a new shock to an already pressured Treasury market.

Breckinridge Capital Advisors co-director of research Nicholas Elfner stated, “The period after Labor Day and the back-to-school season has traditionally been a busy time for the primary market of US investment-grade corporate bonds.” He pointed out:

With the increase in large transactions among mega-cap companies, a total issuance scale of $200 billion in September seems achievable, though this will depend on the delicate balance between supply and demand, as well as a certain degree of stability in the Treasury market.

Several asset managers noted that US investment-grade corporate bond issuance has increased by 38% year-over-year so far this year, on track to set a historical record of $2.1 trillion for the year, with a large amount of funding directed toward AI-related capital expenditures. RBC Global Asset Management's head of fixed income, Andrzej Skiba, indicated that the current supply of AI-related bonds is "approaching the limit that would not disrupt the market". This wave of supply, coupled with the expansion of the US fiscal deficit, rising inflation expectations, and uncertainty in Federal Reserve policy, is reshaping the supply-demand dynamics of the fixed income market.

Treasury Action, but Doubts Remain

This week, the US Treasury announced a significant expansion of its long-term Treasury bond repurchase plan starting next month, which immediately boosted market sentiment—US stocks rebounded from three consecutive days of decline, gold and Bitcoin rose simultaneously, and the yield on the 10-year Treasury bond also retreated slightly.

However, several analysts remain cautious about the effectiveness of the intervention. Natixis US interest rate strategist John Briggs pointed out that the planned bond purchases by the Treasury represent less than 3% of the outstanding long-term Treasury debt and are also below 30% of this year’s expected issuance. "More importantly is the signaling effect—markets now know where some of the Treasury's pain points lie," he said, "but the long-term structural pressures have not changed and will continue to push yields higher."

Some market participants view this repurchase as an attempt by the authorities to suppress long-term rates. Even so, the yield on the 10-year Treasury bond remains around 4.64%, significantly higher than the 4% level seen at the onset of the Iran war in early March this year.

AI Financing Wave Reshapes Corporate Bond Market

The race for AI infrastructure has become the core driving force behind this wave of corporate bond issuance. Microsoft, Alphabet, Amazon, Meta, and Oracle have continuously issued large amounts of long-term corporate debt since last autumn, providing funding for data centers, advanced chips, and AI services.

According to Goldman Sachs analysts, AI-related debt (including investment-grade, high-yield, and leveraged loan markets) is expected to reach $322 billion by 2026. However, by late July, this total was already approaching $500 billion. JPMorgan predicts that financing for mega-scale cloud computing and data centers will reach $400 billion by 2026, substantially up from the previous expectation of $320 billion at the end of last year.

These tech giants are also extending their reach into markets they usually do not penetrate, including the euro-denominated investment-grade bond market. According to Goldman Sachs data, mega-scale cloud computing companies have accounted for 21% of the total issuance of Canadian investment-grade bonds and 19% of Swiss franc-denominated corporate bonds. T. Rowe Price global investment-grade bond portfolio manager Steve Boothe warned: "If next year replicates this year’s scenario, the volatility of the bond market in the second half will further intensify, and yields will continue to rise."

Supply-Demand Imbalance and Competitive Pressure

The massive supply of AI corporate bonds is directly competing with long-term Treasury bonds.

Skiba noted that AI corporate bonds usually have longer maturities, and the credit ratings of the issuers can sometimes exceed that of the US federal government, presenting a substitution effect for long-term Treasuries. Skiba also observed that tech companies are exploring off-balance-sheet financing channels, including large financings for specific data center projects and innovative structures for chip collateral financing.

Wellington Management fixed income portfolio manager Brij Khurana described the current situation as a "flood"—new transactions are surfacing daily, not only from the mega-scale cloud companies themselves but also from various companies in the AI supply chain. Khurana pointed out that since these companies are channeling massive financing funds into AI capital expenditures, it is "hard for the macro economy to fall into recession," which is beneficial for stock market sentiment but compresses the attractiveness of the bond market.

Diamond Hill portfolio manager Henry Song underscored the current core contradiction: "From the perspective of bond investors, the key is where to put the money to create value."

Accumulating Risks, Historical Shadows Emerge

Underneath the surface of market prosperity, risk signals are accumulating. Although this year’s rising yields have somewhat suppressed the widening of credit spreads, once the upward trend in Treasury yields is curtailed, the risk of corporate bond sell-offs will rise, subsequently pushing credit spreads higher.

Some investors have expressed concerns about the similarities between the AI financing boom and the internet bubble of the 2000s, warning that the speed of capital deployment is surpassing the ability of business models to monetize. Haverford Trust's head of investment strategy Hank Smith is particularly concerned about the resurgence of off-balance-sheet financing models, recalling the banking industry of the mid-2000s—"which ultimately ended at a heavy cost."

Furthermore, inflation pressures are also not to be overlooked. Due to the Iran war's impact on energy prices, the UK inflation rate rose to 2.9% in July, and the Eurozone inflation rate also climbed to 2.9%, with market expectations for a 25 basis point rate hike by the European Central Bank in September reaching 96%. In the US, the policy orientation of new Federal Reserve Chairman Kevin Warsh remains highly uncertain, combined with the total US debt exceeding $40 trillion, all of which contribute to sustained pressure on long-term rates.

Breckinridge Capital Advisors co-director of research Nicholas Elfner concluded that whether corporate bond issuance in September can meet the expectation of $200 billion "will depend on the delicate balance between supply and demand, as well as the overall stability of the Treasury market." Against the backdrop of uncertain AI investment returns, the fragility of this balance may face a true market test in September.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。