AI capex surge drives higher US investment grade issuance forecast

UBS raised its 2026 US concern people issuance forecast to $1.8 trillion from $1.725 trillion and accrued its US concern people exertion proviso estimation to $360 billion from $300 billion, citing a crisp emergence successful hyperscaler superior expenditure.

The slope near its US precocious yield, European concern people and European precocious output forecasts unchanged astatine $365 billion, $771 billion and $98 billion, respectively, but chopped its US leveraged indebtedness projection to $360 billion from $450 billion.

UBS said aggregate hyperscaler superior expenditure guidance for 2026 had risen by astir $145b billion, implying an further $40 billion to $50 billion of nationalist indebtedness issuance and lifting expected hyperscaler proviso to $230 billion to $240 billion.

Amazon, Meta and Google had each raised 2026 superior expenditure guidance materially supra consensus, driving full projected hyperscaler capex to astir $770 billion, astir 23% higher than UBS antecedently expected.

The analysts argued that stronger exertion issuance, alongside a pick-up successful mergers and acquisitions and refinancing activity, justified the higher US concern people forecast, which implied year-on-year maturation of 22%.

By contrast, UBS reduced its leveraged indebtedness forecast connected the presumption that artificial quality disruption hazard was underpriced successful indebtedness and backstage recognition markets.

It assumed a astir 2% marginal emergence successful leveraged indebtedness defaults and much than 100 ground points of dispersed widening to 610 ground points by the extremity of 2026, dampening refinancing and leveraged buyout activity.

UBS noted that year-to-date US investment-grade issuance had reached $296 billion, 31% higher than a twelvemonth earlier, with exertion issuance much than doubling arsenic a stock of full supply.

The slope expected much reverse yankee issuance, with US exertion groups issuing successful currencies specified arsenic sterling and Swiss francs to diversify funding, adjacent though hedged yields indicated US dollar backing remained cheaper, peculiarly astatine longer maturities.

Reverse Yankee issuance refers to US companies selling bonds successful non-US currencies to entree antithetic capitalist bases.

UBS argued that the investment-grade marketplace could sorb the further supply, supported by muted sovereign and emerging marketplace issuance and comparatively choky spreads successful structured credit.

However, it maintained a abbreviated presumption connected US investment-grade exertion versus the broader scale successful its exemplary portfolio, informing that spreads could widen from existent levels contempt the beardown request backdrop.