In the US, corporate debt is becoming increasingly expensive
Summary
- The cost of debt in the US is rising, with both the federal government and corporations incurring more debt, particularly to finance AI investments.
- Risk premiums for technology sector bonds have widened significantly, with Amazon's recent bond issuance priced at a premium of around 120 basis points, double last year's level.
- Hyperscalers' debt issuances have surged to approximately 220 BUSD this year, compared to 12.5 BUSD last year, testing the limits of institutional investors' demand.
- Institutional investors face constraints as they typically limit a single issuer's weight to 2–3% of their portfolios, potentially leading to higher premiums and wider risk spreads.
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Automatic translation: Originally published in Finnish 25/08/2026, 04:57 GMT. Give feedback here.
Money is starting to have a high price in the US compared to recent years. I have discussed rising bond yields on many occasions in my macro reviews. The price of corporate debt is also trending upwards, as the supply of bonds is increasing.
US: Corporate and federal debt
Source: LSEG
As the image above shows, not only the federal government but also companies in the US are now taking on debt. The wave of issuances financing AI investments is also starting to test the limits of investor demand, which is reflected in the growth of risk premiums. Although fund managers still find companies like Amazon and Google's parent company Alphabet to be creditworthy, they are increasingly demanding higher returns to accept the increased supply. The concern is that demand may hit a wall if AI investments continue to grow.
Risk premiums for technology sector bonds relative to government bonds have clearly widened: previously, the sector traded at tighter premiums than the market, but now the situation has reversed. An example is Amazon's recent 25 BUSD long-maturity bond, which was priced at a premium of around 120 basis points. This is roughly double last year's level. Risk premiums in the technology sector are now around 89 basis points, nine points wider than the investment grade market generally, according to Reuters.
The indebtedness of hyperscalers has grown sharply: according to Reuters, issuances have risen to approximately 220 BUSD this year, compared to 12.5 BUSD last year. However, the biggest risk is not necessarily related to overall demand, but rather to the internal limits of institutional investors: pension and insurance companies typically limit the weight of a single issuer to 2–3 percent of their portfolio, which starts to restrict demand as the same companies repeatedly issue new debt. So far, the situation is not alarming, but continuous issuances will likely lead to increasingly higher premiums. Money has become more expensive.
