Demand for credit protection has more than doubled the cost of credit derivatives on Oracle Corp.’s bonds since September. Banks and money managers are trading more derivatives tied to tech companies, known as hyperscalers, defaulting on their debt. Trading volume for credit default swaps tied to Oracle jumped to about $4.2 billion over six weeks, up from less than $200 million last year.
Investment-grade companies could sell around $1.5 trillion of bonds in the coming years, with tech companies, utilities, and AI borrowers dominating the market. Single-name credit default swaps on tech companies are attracting interest from banks and equity investors. The rise in trading activity reflects the growing demand for hedging against potential risks in the market.
Some of the biggest buyers of single-name credit default swaps on tech companies are banks, seeking to manage their exposure to tech companies. Equity investors are also buying protection against share price drops. Credit default swaps tied to Meta Platforms Inc. and CoreWeave have started trading actively, reflecting the increasing demand for hedging instruments in the market.
Sterling junk loans have had a record year with £21.2 billion ($27.9 billion) of issuance so far, according to Bloomberg data. Global sales of debt labeled for environmental, social, and governance purposes have declined for the first time since 2022. Sales of asset-backed securities in the US have hit a record high, surpassing previous years.
First Brands founder Patrick James allegedly transferred millions of corporate cash to personal accounts and businesses he controlled, leading to bankruptcy proceedings. Norinchukin Bank and Mitsui & Co. faced a significant loss from debt linked to First Brands. First Brands creditors are demanding new advisers due to potential conflicts of interest in the insolvency case.
Applied Digital Corp. sold $2.35 billion of junk bonds at a steep discount, reflecting investor demand challenges. Banks’ synthetic securitizations have exceeded $670 billion, expanding to offload risk and free up capital. TPG Inc. is in talks to acquire infrastructure services company Pike Corp. for over $5 billion, including debt.
Chinese developer Country Garden Holdings Co. plans to issue up to $13 billion of mandatory convertible bonds amid a real estate crisis. RBC Capital Markets hires managing directors to bolster its debt capital markets team. Mesirow Financial Inc. strengthens its investment-grade sales business with new hires. CVC Capital Partners enters the credit secondaries market to trade stakes in private credit funds.
Read more at Yahoo Finance: AI Debt Explosion Has Traders Searching for Cover: Credit Weekly