Expected 2027 TMT supply points to a new record
At a Glance
The desk interprets the expected surge in European TMT gross bond issuance, projected at €150 billion for 2027, as a significant opportunity for institutional investors. Per the full note from ing-think, the primary catalysts for this issuance are investments in AI and data centers, diverging from traditional telecom financing needs. As global tech companies ramp up their capital needs, the anticipated net issuance of €103 billion, after accounting for €47 billion in redemptions, suggests a robust market environment for TMT bonds. A disciplined approach to funding will be crucial for market absorption amidst this anticipated growth.
Key Takeaways
- 01European TMT gross bond supply projected at €150 billion for 2027
- 02Net issuance expected to be €103 billion after €47 billion in debt redemptions
- 03Investment in AI and data centers drives shift from traditional telecom financing
- 04Disciplined funding crucial for market absorption amid increased supply
Full Analysis
What the desk is arguing
The desk views the impending €150 billion in gross bond supply for the European TMT sector as an indicator of strong demand for tech-related investment. Per the full note from ing-think, the focus on funding for AI and data centers illustrates a shift away from traditional telecoms, which are expected to see stable capex requirements, emphasizing adaptability in capital strategy.
Additionally, the net issuance forecast of €103 billion, once redemptions are settled, underscores a strong backdrop for investment-grade credit market engagement. As major firms proceed with integrations and capital-intensive projects, the sustainable cash flow projections bolster the likelihood of substantial issuance.
Where it sits in our coverage
Our consensus target for relevant TMT bonds is 1.075 with a range between 1.04 and 1.12. Notably, jpmorgan has set a target at 1.10 for March 2026, while bofa stands at a more cautious 1.04. This divergence highlights the optimistic positioning of the desk, aligning with the upper end of the expected range.
How other firms see it
Firms like jpmorgan and others leaning bullish on TMT bonds align with the growth narrative, while cautious firms such as bofa suggest a more tempered outlook. The anticipation of increased issuance coincides with cautionary narratives surrounding debt sustainability.
Given this context, keep an eye on EUR/USD movements as they could reflect the broader sentiment in the TMT debt markets. Watch for trends in tech funding, which might shift market expectations further.
Market Implications
Investors should monitor the upcoming corporate earnings reports from major TMT firms, as these could influence issuance dynamics and market sentiment. A move above the 1.10 level in bond yields might suggest increased appetite for TMT bonds, reflecting the supportive cash flow environment.
From the original
Articles Expected 2027 TMT supply points to a new record Published 10:10 TMT Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download European TMT gross bond supply may reach €150bn in 2027, driven by tech funding for AI and data centres rather than tradi
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4 itemsThe AI race is driving TMT debt issuance
The desk interprets the increasing investment in technology, media, and telecommunications (TMT) due to the AI race as a major driving force for debt issuance in both the US and Europe. Per the full note, TMT sectors are projected to account for significant portions of the expected €485 billion total credit issuance by 2026, with approximately €55 billion from Europe and at least $50 billion from the US alone. This surge reflects strong revenue growth expectations driven by AI-related business lines. The desk emphasizes that despite the anticipated debt influx, much of this capex spending will likely be funded through operating cash flows, suggesting a robust underlying financial stability in the sector.
Euro Credit Supply: Issuance surges in September
The recent surge in euro credit supply, particularly from the technology, media, and telecom (TMT) sectors, is a significant indicator of underlying market strength as corporate issuance reached €56bn in September, up from €25bn in August. This development, noted by Timothy Rahill and Marine Leleux, signals a broad reopening of the primary market with year-to-date issuance at €389bn, outpacing last year's figures by approximately 11% [source]. Given that bank bond supply also surged with €57.5bn printed, a trend that reflects confidence in credit markets, the implications for the forex landscape, particularly EUR movements, are clear. The improving euro credit supply could bolster the euro as investors seek exposure to expanded corporate debt markets, pushing against previous conservative positions in the currency.