LIVE MARKETS-JPMorgan questions whether AI bond binge is behind Treasury yield surge

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JPMORGAN QUESTIONS WHETHER AI BOND BINGE IS BEHIND TREASURY YIELD SURGE

Heavy bond sales by tech giants to fund artificial intelligence may not be the main reason US Treasury yields are rising, according to JPMorgan, which noted that yields jumped in September even though hyperscalers and data center companies didn't sell a single dollar bond.

Credit analysts led by Nathaniel Rosenbaum explained that net high-grade issuance was only slightly higher last month, while the 10-year Treasury yield rose 53 basis points, twice its 27-basis-point climb in July.

"So much for the consensus thesis that hyperscaler issuance is the main culprit for higher sovereign yields?" they said.

Overall corporate supply stayed heavy during the month. High-grade issuance reached $198 billion in September, 34% above the four-year average for the month and $16 billion short of a September record. A $30 billion media deal on Tuesday helped push the total up. It was the second-largest bond sale of the year and tied for the sixth-largest ever. Year-to-date supply stands at $1.695 trillion, up 30% from a year earlier.

Rising yields, meanwhile, hit returns hard. JPMorgan's JULI high-grade index lost 2.7% in September, its worst month since February 2023. Long-dated bonds fell 4.5%. The index is down 3% for the year, its worst showing since 2022, though performance was significantly worse that year, when it had lost 18% by this point.

(Karen Brettell)

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