🌍 PIMCO: AI Bond Binge Is Splitting U.S. Dollar and Euro Credit Markets
PIMCO's credit team finds that heavy hyperscaler bond issuance to fund AI capex is creating a widening performance gap between USD and EUR investment-grade credit.
• Hyperscalers now account for ~5% of the USD IG index vs just 1.2% of the EUR IG index, after $120B of USD net supply this year alone (vs €22B in Europe).
• Issuer-matched Amazon and Alphabet bonds show EUR paper outperforming USD paper — a sign of "demand fatigue" in the dollar market.
• Spread dispersion in USD IG has hit levels not seen since the April 2025 tariff shock, even as headline spreads sit near multi-year tights.
Bloomberg consensus sees hyperscaler capex topping $1 trillion/year from 2027, meaning this technical divergence is likely to persist.
🔗 Read more
#pimco