Global credit is absorbing record corporate bond supply as the AI data centre build-out floods the market with debt, yet spreads remain at multi-decade tights. Global credit analysts Sandro Morassutti and Marty Lee revisit the risks the team flagged a year ago, AI-linked issuance, Fed credibility and independence, fiscal spending, and geopolitical risk, and explain why credit spreads have held while government yields have driven the move. They walk through term premium and the long end, why they favour short-dated high-quality credit, the modest duration they have added, and how they are positioned to act when a dislocation finally arrives.
Key Takeaways
AI data centre debt has driven U.S. corporate bond supply to about $1.7 trillion, up 27% year over year and on track for a record.
Despite record issuance, investment-grade spreads sit near 80 basis points and high yield is tighter year to date, at multi-decade tights.
Most of the move in yields has come from government bonds: sovereign yields hit multi-decade highs in the U.K., Japan, and beyond.
The Fed hiked and kept its independence, but credibility and term premium concerns helped push the U.S. 10-year through 5%.
Credit is not directly pricing geopolitical risk; ECB research shows spreads repricing far less than history would imply.
The team favours short-dated, high-quality credit, added modest duration (about 1.2 to just over 2 years), and lifted high yield from roughly 8-9% to 15-16%.
The goal is not to predict the dislocation but to hold the quality and liquidity to buy one.
Companies Mentioned: Amazon, Alphabet, Meta, Oracle
Host: Kevin Minas, CFA, CAIA, Mawer Institutional Portfolio Manager
Guest: Sandro Morassutti, Mawer Credit Analyst; Marty Lee, Mawer Credit Analyst
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