Expected 2027 TMT supply points to a new record
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.
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.
How firms align with this view
Aligned with the desk view
Contrary positioning
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
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.
Risks to this view
A significant uptick in interest rates or a downturn in cash flow projections from key players could undermine issuance forecasts, leading to potential volatility in TMT bond markets. Additionally, adverse regulatory changes affecting tech funding could reverse current bullish sentiment.
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 traditional telecoms. Strong cash flows and credit quality support issuance, but disciplined funding will be key to market absorption Jan Frederik Slijkerman AI and data centre investment is expected to be the main driver of TMT bond issuance in 2027 We predict another year of strong supply for the European TMT sector. We expect €150bn of gross issuance and €103bn of net issuance, given €47bn of debt redemptions.
The additional issuance is not coming from the traditional telecom or media issuers, but from global tech companies. As we expect the data centre build-out to continue in 2027, issuers are likely to return to the European investment-grade credit market to raise part of the required funding. Meanwhile, we do not see a major reason for traditional sectors to reduce or increase indebtedness, as factors driving indebtedness higher are countered by factors driving debt lower, as we’ll explain below.
European investment-grade TMT supply (€bn) Source: Dealogic, ING "> Source: Dealogic, ING Telecoms supply We will break down the main factors affecting debt issuance, starting with FY27 capex requirements. While we expect capex as a percentage of sales to decline, aggregate capex is likely to increase slightly. Companies such as Orange and Vodafone are integrating recent acquisitions and may need to invest additional capital to realise merger synergies.
We therefore do not expect the lower capex-to-sales ratio to translate into less issuance. Nevertheless, BT and KPN are exceptions, as both clearly intend to reduce capex in FY27. Low-single-digit EBITDA growth gives companies some capacity to issue additional debt while maintaining stable leverage.
However, higher interest rates provide an incentive to keep debt levels in check. We therefore expect the increase in debt issuance to be driven mainly by M&A. Several debt-funded acquisitions of smaller networks could generate around €5bn of net issuance.
A further €3bn could come from US operators raising euro-denominated funding for spectrum payments in 2027. Technology supply In 2027, we believe the AI build-out will continue. Tech companies currently report healthy returns on investment, demand for AI services continues to outpace supply, and companies want to maintain their market positions.
We therefore expect further capex growth in 2027, with the large hyperscalers investing close to US$1tr in fiscal 2027. As in 2026, we expect these companies to finance their investments largely from operating cash flow, but also through debt issuance, with additional funding coming from European markets. We expect hyperscaler data centre operators to issue at least €60bn in 2027, somewhat above the approximately €35bn issued year-to-date in 2026, including issuance by NTT.
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