A sharp slowdown in supply growth would ease one source of pressure on bond markets after a heavy 2026, which could help keep corporate spreads tight if demand holds up. AI borrowing stays the main swing factor for supply: with capex expected to top $1.3 trillion, hyperscaler issuance will keep testing investor appetite for technology credit. The reference to the Middle East war links the outlook to oil. Any renewed rise in crude would feed inflation, push back hopes of lower rates and strengthen the headwinds S&P describes. A growing share of Chinese debt in global benchmarks would also gradually leave index-tracking funds more exposed to Chinese rate moves.
—
Earlier:
—
After a bumper 2026, S&P expects growth in global bond issuance to slow to a crawl next year, though AI borrowing and refinancing needs mean the debt keeps coming.
Summary:
- S&P Global Ratings forecasts global bond issuance growth of 2.7% in 2027, down from an estimated 12.2% in 2026 and the slowest pace in five years.
- Total global issuance is expected to reach around $11.7 trillion this year.
- Higher interest rates and uncertainty linked to the Middle East war could curb borrowers’ appetite.
- Hyperscaler bond issuance is nearing $300 billion this year and is expected to rise more slowly in 2027, with AI-related capex forecast to top $1.3 trillion.
- China is likely to remain a source of issuance growth as falling government bond yields lower borrowing costs.
- Demand for sovereign and corporate debt remains robust, and corporate bond spreads have narrowed.
Growth in global bond issuance is set to slow sharply next year, with S&P Global Ratings forecasting a 2.7% increase in 2027, down from an estimated 12.2% this year and the weakest pace in five years, according to reports of its latest outlook published Tuesday.
The slowdown comes off a very high base. S&P expects total global issuance to reach around $11.7 trillion in 2026, so even modest growth next year would keep volumes at very large levels. The forecast points to a loss of momentum rather than a retreat by borrowers from debt markets.
Two factors could hold issuers back, according to S&P. Interest rates remain elevated, raising the cost of new borrowing and of refinancing existing debt, and uncertainty linked to the Middle East war could make some borrowers more cautious about timing. Many issuers have limited room to wait, however, with maturing corporate debt needing to be refinanced and governments continuing to borrow to cover defence spending and the costs of ageing populations.
Artificial intelligence remains one of the main sources of supply. Bond issuance by hyperscalers, the large cloud and data centre operators financing AI infrastructure, is approaching $300 billion this year, and S&P expects it to rise again in 2027, though at a slower pace. AI-related capital expenditure is forecast to exceed $1.3 trillion next year, which suggests the largest technology companies will keep returning to debt markets to fund it.
China is expected to remain a source of growth. Falling Chinese government bond yields have lowered borrowing costs for local issuers, and continued growth in issuance there could gradually lift China’s weight in major bond benchmarks. That would increase the exposure of index-tracking funds to Chinese interest rate moves and to currency hedging decisions.
Demand has so far kept pace with supply. S&P said appetite for sovereign and corporate debt remains robust, and corporate bond spreads, the extra yield investors demand over government debt, have narrowed, indicating that investors have absorbed this year’s heavy issuance without requiring much additional compensation.
The 2027 outlook therefore hinges less on investor demand than on the cost of borrowing. If rates stay high and geopolitical uncertainty persists, issuance growth could stay subdued beyond next year.
This article was written by Eamonn Sheridan at investinglive.com.