The US corporate bond market is experiencing a significant increase in sales, nearing record levels, driven by a surge in AI-related debt, indicating a substantial growth in borrowing linked to artificial intelligence investments.
The Treasury Department plans to increase the size of its bond auctions in order to manage its growing debt load and rising financing costs. The department will auction $112 billion in debt next week and will increase the auction size of various maturities, focusing more on coupon-bearing notes and bonds. The Treasury expects to increase the sizes for 2- and 5-year notes by $3 billion a month, the 3-year note by $2 billion a month, and the 7-year note by $1 billion a month. The auction changes are important to investors as they could provide insight into where yields are heading.
The Bank of England's rapid pace of bond sales is causing concern among investors, with some likening it to "selling gold at the bottom." The central bank is unwinding its holdings of UK government bonds, known as gilts, which were accumulated during the 2008 financial crisis. The Bank of England has been the most aggressive among central banks in selling these bonds, leading to significant losses that are being backstopped by the UK Treasury. The pace of sales has put downward pressure on gilt prices and raised fears that the market may struggle to absorb the supply. However, some investors see this as an opportunity, as inflation eases and peak interest rates approach. The Bank of England's Monetary Policy Committee is due to meet on September 21, where further details on gilt sales may be provided.