Hyperscale US corporate bond issuers flood market with $18 billion in new paper

By Matt Tracy and Gertrude Chavez-Dreyfuss

WASHINGTON/NEW YORK, May 11 (Reuters) - Companies flooded the U.S. corporate bond market with $18 billion in new paper on Monday, the biggest issuance since Meta's jumbo bond sale on April 30, setting the stage for what analysts expect will be the busiest May for issuance in six years.

Twelve investment-grade issuers tapped the U.S. bond market, according to market participants, including U.S. wireless carrier Verizon Communications (VZ) and Japanese automaker Toyota (TM).

The day's sales follow $64 billion total in the last week of April. Corporate bond issuance last week was $39 billion, down from about $47 billion in the first week of May 2025.

The daily surge in issuance follows the heaviest April since 2020, when companies scrambled for cash to survive the initial pandemic shutdown, BofA Global analysts said in a May 1 report. Investment-grade deal volume totaled $196 billion last month, the analysts noted.

So-called "hyperscalers" such as Alphabet and Meta Platforms (META) have emerged as a dominant force in primary markets this year, as they borrow to build artificial intelligence infrastructure. They have issued roughly $110 billion of bonds so far in 2026, supporting a further $20 billion in data center financing. Together, that represents about 15.5% of total investment-grade issuance, up from just 3% a year ago, according to Nathaniel Rosenbaum, head of U.S. high-grade credit strategy at J.P. Morgan.

The firms are "punching way above their weight in terms of expanding their debt footprint," said Rosenbaum. "By the end of this year, we think tech could easily be larger than the U.S. banks sector-wise."

Banks have traditionally dominated U.S. bond issuance, reflecting their structural reliance on wholesale funding markets. But the rapid rise in tech borrowing is beginning to change that longstanding dynamic.

Alphabet, the parent of Google, tapped the euro and Canadian bond markets last week for ?9 billion and C$8.5 billion in debt. Meta, the latest hyperscaler to tap the U.S. bond market, sold a $25 billion six-part series of bonds on April 30.

Hyperscalers are well-positioned to issue $250 billion in public market bonds this year, according to Meghan Robson, head of U.S. credit strategy at BNP Paribas. In effect, companies are choosing to lock in funding while investor demand remains resilient and before a potential repricing of risk is reflected in higher base rates or wider spreads, according to analysts.

That calculus is particularly relevant if energy-driven inflation pressures keep central banks on hold or delay any easing cycle, they said.

All told, Robson forecasts $185 billion in May IG bond issuance and $1.85 trillion for 2026, which would be an annual record. In addition to AI-related deals, opportunistic deal-making has also contributed to this year's volume, she noted.

"There has been more opportunistic issuance this year than we would have expected," Robson said.

Google and Meta did not immediately respond to requests for comment.

The late spring rush comes amid inflation concerns as the prolonged U.S.-Israel/Iran conflict and the closure of the Strait of Hormuz have resulted in elevated oil prices, which in turn has driven up bond yields and lifted borrowing costs.

For issuers, however, the decision to accelerate supply reflects a tactical trade-off. While all-in yields are elevated, credit spreads - the premium companies pay over Treasuries- remain relatively tight, preserving attractive financing conditions on a historical basis.

Spreads between corporate bonds and Treasuries continue to reinforce that scenario. Despite the rise in government borrowing costs, credit spreads have held near historically tight levels, signaling that investors still view corporate balance sheets as broadly resilient.

"That divergence suggests markets are treating the most likely outcome as a mild stagflationary shock, enough to constrain central banks, but not enough to pose more serious long-term risks," said Lotfi Karoui, multi-asset credit strategist at PIMCO, in a note.

The yield on the benchmark 10-year Treasury note closed on Monday at 4.41%, while the average investment-grade spread over Treasuries closed Friday at 78 bps, according to the ICE BofA Corporate Bond Index. (Reporting by Matt Tracy in Washington and Gertrude Chavez-Dreyfuss in New York; Editing by David Gregorio)