Rising corporate bond issuance is creating competition for the U.S. Treasury, a potential stress point for investors and debt markets, as reported by Fortune.
As federal debt surpasses $38 trillion, companies — including hyperscalers and other tech firms — are issuing massive investment-grade bonds to fund data centers and infrastructure, potentially siphoning demand from Treasury securities. Apollo chief economist Torsten Slok told Fortune that corporate investment-grade issuance could reach as high as $2.25 trillion in 2026, raising questions about who will absorb the new supply and how it could influence Treasury rates.
The Treasury has already borrowed $601 billion in the first three months of fiscal 2026, $110 billion less than the same period last year, aided by tariffs that boosted revenue. That relief may be temporary as the Supreme Court could strike down President Trump’s global tariffs, while tax refunds under the One Big Beautiful Bill Act are expected to surge. At the same time, Trump has pledged to increase annual defense spending from $1 trillion to $1.5 trillion, potentially deepening federal deficits and increasing borrowing requirements, the report said.
Despite a series of Federal Reserve rate cuts last autumn, Treasury yields remain roughly at early September levels, offering little relief on debt-servicing costs. Slok highlighted that Treasury yields must remain competitive relative to corporate debt to attract sufficient investment. Failure to do so could increase the risk of fiscal dominance, where the central bank is effectively compelled to finance widening deficits — a scenario flagged by former Treasury Secretary Janet Yellen.
Investor composition adds another layer of complexity. Foreign governments, once accounting for more than 40% of Treasury holdings, now represent less than 15%, leaving the market increasingly reliant on profit-driven private investors, Fortune reported, citing JPMorgan’s Geng Ngarmboonanant. This shift reduces the market’s built-in stability and makes it more sensitive to rate changes and supply shocks, particularly during periods of market stress.
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