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Wall Street’s bond boom masks risky frenzy
While Wall Street’s new bond boom is being sold as proof of depth and resilience, a closer look suggests there’s too much money chasing too few decent ideas. According to research from Barclays Plc, competition in the United States primary credit market - where companies issue brand-new bonds - is running at the highest level since at least 2017. The bank examined more than 10,000 bond deals and over a million investor allocations drawn from the Trade Reporting and Compliance Engine, or TRACE - the U.S. system that records over-the-counter bond trades. Over-the-counter simply means trades done directly between dealers and investors rather than on a public exchange like the ASX. The headline numbers look impressive. Competition in so-called investment-grade bonds - debt issued by companies considered financially strong - is about 15% higher than in 2017. In high-yield bonds - debt from riskier borrowers that pays higher interest - competition is up roughly 30%, while large deals north of US$1 billion have seen some of the sharpest increases. But when deals are “sold out” within hours, and allocations are sliced thinner across a widening investor base, it’s not necessarily a good sign of health. It can a
Bonds
Bond flash: US spreads tighten as Aussie yields rise
While strong United States corporate bond issuance and demand show no signs of letting up, with calendar year-to-date issuance of around US$309 billion - up almost 30% on the same time last year – U.S. investment grade spreads have tightened to near record levels at 75 basis points (0.75%). New issue concessions, where additional spread is provided to make sure the raise is successful, have fallen to a low 2 basis points. Meantime, while U.S. markets are expecting two further rate cuts this year, yields here in Australia continue trending higher on the back of lingering inflation concerns, with the Reserve Bank (RBA) likely to raise rates twice again this year.Trading EconomicsChanging index compositionWhile this has moved Bond Advisor’s A$ Corps index to a yield of 5%-plus, what’s also evident are radical changes within the index, in terms of both issuer composition and term. The changing term composition of this index may be a function of shorter-dated state government issuance, but it also highlights the fact that the Australian Office of Financial Management (AOFM) – as Australia's sovereign debt manager - has tried to issue fewer long-term Australian Commonwealth Government Bonds (ACGBs) at higher levels. Meanwhil
Bonds
AI disruption raises credit cycle risks
The speed of AI-driven change is giving rise to a new form of structural credit risk - underpinned by an inability of legacy companies to amortise (gradually write off) debt, which potentially heightens the risk of permanent capital loss, rather than temporary earnings weakness. At least that’s the take of Richard Quin, chief investment officer at Bentham Asset Management, who expects AI-disruption to bring with it brutal outcomes for bondholders. Quin argues that while financial markets look stable right now – with fixed income markets currently enjoying the calm of tight spreads and stable headline employment – the widening gap between future AI winners and losers threatens to undermine this. What investors need to understand, adds Quin, is that while big companies are using AI to boost profits, their smaller counterparts are struggling with higher costs and weaker productivity. While AI is arguably creating efficiency and boosting productivity, Bentham believes it also represents a new type of risk for people who lend money to companies, aka bond investors.‘Schumpeterian’ credit gapThe net effect of what Quin has dubbed the ‘Schumpeterian’ credit gap – where innovation destroys old businesses faster than they can ad
Bonds
Bond flash: Rotation to shorter bonds as rate risks rise
Due to robust demand from investors seeking higher income, the strong annual net bond issuance by non-financial corporations experienced over 2025 is expected to persist into 2026. However, Australian bond investors are actively rotating into shorter-dated securities as of February 2026, due to a significant divergence in interest rate outlooks between Australia and the United States. While Australia’s central bank is looking decidedly more hawkish on rates, in the U.S., the Fed is widely expected to continue easing, with some forecasts projecting a neutral target of 3.00% to 3.25%.Global investors sidestep US debt woesUnsurprisingly, with Australian 10-year yields now around 65 basis points higher than U.S. Treasuries - the widest premium in three years - global investors are seeking "Australian duration" as an alternative to U.S. debt woes. Fund managers are rotating out of longer-dated Tier 2 (T2) bank bonds - due to inadequate spread compensation – in favour of shorter-dated 2030s that offer comparable spreads with less duration risk. While the market is currently pricing in one to two additional RBA rate hikes for 2026 - which has pushed short-term yields higher - longer-term yields also remain sensitive to global
Bonds
Where to park your bond money if rates rise in 2026
Rightly or wrongly, the market is pricing in the full extent of two cash rate rises this year, while outliers like AMP’s chief economist Shane Oliver expect the Reserve Bank of Australia (RBA) to keep interest rates on hold at 3.60% throughout 2026. While inflation remains too elevated for the RBA to adopt an easing bias, Oliver believes the modest slowdown in underlying inflation in November gives the central bank breathing room, while economic data continues to deliver mixed signals. “The money market’s expectations for rate hikes have cooled a bit with only a 24 per cent probability of a February hike now priced in but still looks too hawkish for the year as a whole,” Oliver said. “Our expectation is for trimmed mean inflation around 0.8 per cent qoq [quarter on quarter] or 3.2 per cent yoy 2026 which would be in line with the RBA’s last set of forecasts and should allow the RBA to sit tight on rates.” However, assuming Oliver is wrong, and the RBA does decide to raise rates - while virtually all other global economies are cutting - now could be a good time to increase overall allocation to fixed income through attractive options like floating rate bonds, low-risk bonds and others. Australia aside, the only ot

Bonds
Bond sell-off deepens as Trump ramps up tariff threats
What began as another round of aggressive rhetoric from United States President Donald Trump has now soured into a full-blown repricing of risk, debt and credibility across the world’s biggest economies. What we’re currently witnessing isn’t a technical wobble; it’s a warning shot to Trump. At the centre of the storm sits Washington, with Trump threatening to slap tariffs on European allies — explicitly tying trade punishment to support for U.S. control of Greenland — that have dragged markets straight back into trade-war mode. However, this time, investors didn’t wait around for policy details; they sold first and asked questions later. U.S. Treasurys, long treated as the planet’s safest asset, were dumped aggressively with long-dated yields surging toward levels that historically force political U-turns. The move wasn’t subtle with the 30-year yield barrelling toward the psychologically charged 5% mark, while the benchmark 10-year broke out of its long slumber. When bonds sell off like this, markets aren’t just nervous, they demand compensation for chaos. Europe didn’t escape the furore with German bunds, French OATs, Italian debt and UK gilts all moved sharply higher in yield. This serves as a synchr
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Trump disclosures reveal US$100m bond buying spree
United States President Donald Trump purchased up to US$100 million (A$149.3 million) in municipal and corporate bonds between mid-November and late December, according to newly released financial disclosures. Disclosures posted on Thursday and Friday show Trump bought a broad mix of municipal bonds issued by cities, school districts, utilities and hospitals, alongside corporate debt from companies including Boeing, Occidental Petroleum and General Motors. The filings also reveal purchases of up to $2 million in bonds issued by Netflix and Warner Bros Discovery, just weeks after the companies announced plans for a merger. The disclosure, filed with the Office of Government Ethics and initially submitted on Wednesday, lists 191 financial transactions. These include two sales worth at least $1.25 million and between $1 million and $51 million in purchases of corporate and municipal bonds. The exact size of the transactions remains unclear, as the report lists amounts in broad ranges, in some cases between $1 million and $5 million. All of the reported investments were made between 14 November and 19 December. A White House official told CNN that Trump’s stock and bond holdings are managed independently by third-par
Bonds
Investor appetite to test surging AI credit market in 2026
According to reports referenced by major Australian ETF issuer Betashares, AI capex-related debt issuance will be the big story for credit markets in 2026 with a dramatic surge in tech-related bond issuances driving a gradual widening in credit spreads as the market absorbs this supply. Based some projections, annual AI-related capex will grow fivefold by the end of the decade with hyperscaler companies and AI labs demanding unprecedented amounts of debt financing for their planned infrastructure buildouts. Based on the observations of BetaShares head of fixed income Chamath De Silva, capex-related issuance is already having an impact at the margin, with the technology and communications sectors currently underperforming. As a result, spreads are widening on a relative basis, in both U.S investment grade and high yield parts of the market. AI-related capex to soar Given that U.S. yields have increased over the last five years, and annual AI-related capex is expected to grow from US$400 billion to over US$2 trillion by 2029, De Silva has raised alarm bells over the bond market's capacity to handle the expected spike in issuance. "We believe that the biggest constraint to the capex spending commitments being reache
Bonds
Sharp repricing makes bond market harder to ignore
What a difference a month makes: After what’s been a rollercoaster year for bonds, we’re now finishing 2025 with an about-face on the additional rate cuts that the market was expecting only last October, to the possibility two rate hikes in 2026. Reflecting the scale and speed of the market’s pivot, Australian 10-year government bond yield spiked to over 4.8% last week - a whopping 55 basis points higher than the U.S. 10-year yield - a level last seen in November 2023. With bond markets having sharply repriced the outlook for interest rates in recent weeks, there’s no better time to review the risk assets within your portfolio. While government and high-grade bonds are currently deemed attractive, some commentary suggests that credit spreads in the corporate bond market are currently tight, meaning investors may not be adequately compensated for taking on additional default risk in that segment. Australian 10-year government bond yield It was easy to conclude that the current 3.6% cash rate was close to neutral, or at least that was the case until the October consumer price index (CPI) release threw a spanner in the works. With inflation well over the 2-3% target, the Reserve Bank (RBA) may find itself with little ch