AI Debt Surge Tests Credit Markets' 1990s-Like Euphoria

US investment-grade corporate debt spreads tightened to a 30-year low of 71 basis points, according to Bloomberg data, as credit investors brace for a major test amid AI spending demands. Hans Mikkelsen of TD Securities forecasts US high-grade debt spreads may widen to 95 basis points by 2026, citing tech companies’ trillions in AI funding needs. With earnings reports and bond issuances from major firms like Meta Platforms approaching, concerns grow over market absorption at current tight levels. Global corporate debt spreads also hit record lows, reflecting broader market trends. Despite recent geopolitical relief, government bonds remain pressured by selloffs in Japanese debt and Greenland tensions. Analysts warn that increased issuance could push spreads wider, countering the current favorable economic environment.