Will Meta Break Hyperscaler Bond Drought?
Ahead of Meta’s ($META) earnings, 5-year credit default swaps hit new record highs on Tuesday across a range of the largest Tech companies.
“Credit default swaps tied to Oracle Corp. ($ORCL), broadly seen as a barometer for AI debt risk, traded as high as a record 343 basis points, ICE Data Services data shows. A gauge of Meta’s credit risk has also touched an all-time high, soaring as much as 6.3 basis points to 114.8 basis points ahead of its earnings report Wednesday, the data shows.”
“We have yet to find some kind of a landing zone for the level of debt issuance that the market needs to absorb,” said Lotfi Karoui, multi-asset credit strategist at Pacific Investment Management Co in an interview Tuesday. “There’s still a wide range of estimates as how much debt capital this build out will end up consuming in general.”
That comes after $451 million of hyperscaler bonds were bought on Monday, the highest net buying since mid-September — likely a result of investors selling hyperscaler debt due to supply and demand concerns, according to Bank of America.
With the rise in funding costs there hasn’t been a hyperscaler bond deal in two months. We’ll see if we get news of one from Meta who previously said in April they would not issue again until the fourth quarter. Notably, Meta has moved up its normal last Wednesday of October reporting date a week, many think to do just that.
Source: Bloomberg