Jeffrey Sherman on AI Debt Issuance and the Stress in Triple C | Bloomberg

Hyperscalers and technology firms are aggressively navigating the credit markets to fund massive capital expenditure requirements for infrastructure build-outs. Despite rising borrowing costs, these issuers remain incentivized to secure funding now before rates potentially climb higher, utilizing diverse levers such as the commercial mortgage and asset-backed securities markets. While bond spreads were previously too tight, secondary market prices in the high 70s and low 80s now offer attractive entry points and meaningful cushions for credit investors. Although significant spread widening in the Triple C cohort raises concerns about market health, the distress remains concentrated in specific industries and has not yet bled into higher-quality single-B assets. This suggests the market is effectively discerning risk, leaving the most speculative names to distressed debt specialists while traditional investors begin "nibbling" at hyperscaler bonds offering yields between 12% and 15%.