Concerns over debt issuance from tech firms including Meta and Alphabet are premature
by Helene Durand and Abhinav Ramnarayan
Concerns over massive debt issuance from tech giants such as Meta Platforms Inc. and Alphabet Inc. creating oversupply in the credit market are premature, said panelists at the Bloomberg Intelligence European credit market outlook conference in London.
Tech firms have recently hit the bond market on both sides of the Atlantic, partly to help meet gargantuan AI-related investment needs, raising worries that this rapid swelling of the debt universe could end up leading to a sharp selloff.
JP Morgan Asset Management’s Iain Stealey said the sales had created a bit of “a shock and some temporary indigestion,” and he reckons investment-grade spreads are about 10 basis points wider as a result. But he told the conference on Thursday that broader fears were overdone.
“Yes, there has been a lot of issuance, but these are enormous companies producing significant earnings every year,” said Stealey, who is chief investment officer of international fixed income at the asset manager. “It’s not yet at a point where we should be overly concerned. In fact, some of the concessions offered on recent deals make them quite compelling opportunities, especially given the very high quality of the issuers involved.”
Stealey believes future supply should be more evenly spaced. Meta has already indicated it likely won’t issue again until the second half of next year, he said.
In addition, the fact that the big tech companies have very little debt means that they are attractive as credit, said Mahesh Bhimalingam, global head of credit strategy at Bloomberg Intelligence. He pointed out Alphabet has a better credit rating than France, while other firms such as Apple Inc. and Microsoft Corp. would also stand out among higher-rated names if tapping the market in Europe.
“So when they do come in, I think there’s going to be a massive bid,” he said.
Credit Positive
Speakers at the conference struck an upbeat tone on credit overall, arguing that carry and healthy balance sheets would be supportive in 2026.
“Yields remain very attractive, which makes moving up in quality a sensible strategy,” said Ashwin Palta, global high-yield portfolio manager at BNY Investments Newton. “You’re being paid appropriately for that level of risk, whereas lower-quality names aren’t offering enough spread pickup to justify reaching down the credit curve.”
He added that in terms of subordination, Additional Tier 1, Restricted Tier 1 and hybrids looked appealing, particularly compared with Double B high yield.
AT1 bonds have been one of the strongest performers this year so far, with returns topping 10% year-to-date, and speakers at a later panel on this subject said they expect this to continue in 2026.
“Probably we are at peak asset quality, but we start from a relatively good position, so I probably would say ‘more of the same’,” said Filippo Maria Alloatti, head of financials credit at Federated Hermes.
The best upside in this space is in the smaller banks issuing bonds, according to Jackie Ineke, chief investment officer of Spring Investments.
She said, for example, that Metro Bank Holdings Plc’s AT1 bonds carry less risk than many larger lenders. The British challenger bank has seen its shares and bonds recover sharply after it emerged it would be a beneficiary of Chancellor Rachel Reeves’ deregulation push across the City of London. It was also recently upgraded by Fitch Ratings after it returned to profitability in the first half of 2025.
Ineke said there’s more risk associated with some larger investment banks than with Metro Bank after “where it’s been and where it’s going.”
“It’s a turnaround story,” she added.
Copyright Bloomberg News
