US tech giants' AI borrowing could push up Europe's bond yields

Other major technology companies, including Meta, Amazon and Microsoft, are also expected to increase overseas borrowing to fund AI investments.Live EventsTechnology-related debt issuance in the United States has exceeded $250 billion so far this year, up 81% year-on-year. European issuance stood at $39.3 billion, an increase of around 5%, according to LSEG data cited by Reuters.BNP Paribas expects net supply of euro-denominated investment-grade corporate bonds to rise 83% to €192 billion in 2027, compared with €105 billion this year.

US companies issuing bonds in European markets, known as reverse Yankees, could account for €80 billion to €90 billion of next year's supply, with hyperscalers making up most of the total.Asset swap spreads on the ICE BofA Euro Investment Grade index widened by 11 basis points last month, suggesting investors are demanding higher compensation to hold corporate bonds.European companies are also increasingly favouring shorter-maturity debt amid concerns over rising long-term yields and heavier issuance.

Vontobel portfolio manager Christian Hantel told Reuters that some issuers are shifting from traditional 10-year bonds to maturities of five to seven years.AI Debt Issuance May Pressure Government BondsThe additional corporate borrowing could also weigh on European government bond markets, which are already facing concerns over fiscal pressures and inflation.European Central Bank President Christine Lagarde said last week that hyperscaler debt issuance had contributed to rising sovereign bond yields, Reuters reported.As major technology companies offer investors highly rated bonds with yields typically above government securities, the growing supply could intensify competition for investor demand and push up borrowing costs across European markets.(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)(You can now subscribe to our ETMarkets WhatsApp channel)