AI-related supply has helped U.S. dollar investment grade gross debt issuance keep its active momentum all through summer, prompting Goldman to raise its 2026 USD IG gross credit supply forecast higher. The bank raised the full-year gross issuance forecast to $2.3 trillion from $2.1 trillion, while also lifting the net supply forecast to $1.0 trillion from $850 billion previously. “For 2027, we see scope for a continued, heavy pace of activity and are penciling in $2.4 trillion for USD IG gross supply,” it added. About 24% of USD IG gross supply is owed to AI-related issuers this year, which helped fuel overall USD IG credit supply to a year-to-date record, compared with mere 6% of euro IG supply and 2% increase in overall EUR IG issuance, according to Goldman. “Summer slowdown [is] proving elusiveโdriven in large part by AI-related supplyโand market participants expecting a very busy September, ” the bank said in its report Thursday . The investment bank also expects euro’s technical advantage to narrow with the dollar as hyperscalers are watching beyond the dollar market for funding, noting that EUR IG credit represents the largest alternative public debt market. Goldman, which highlighted that year-to-date returns were negative for USD IG and EUR IG, expects rates to remain the key driver of total returns. “Spreads are only modestly wider than at the start of the year, with higher US Treasury and Bund yields accounting for the weak return performance,” Goldman said. It said that returns from USD IG and EUR IG would be materially lower, should rates remain near current levels, while adding that it expects yields to decline, helping improve returns but still leaving them below historical averages. Global bond yields have been climbing to multiyear highs, amid concerns over elevated energy costs, heavy government borrowing and inflation worries. Germany’s 10-year yield reached its highest since 2011, while U.S. 10-year Treasury yields hit their highest since November 2023 in recent days. The rise in 10-year U.S. Treasury yields of 61 basis points this year so far offset a large chunk of the USD IG payout, while the 52 basis points increase in 10-year Bund yields eroded much of the “carry cushion in EUR IG,” Goldman said.
