JPMorgan: 2027 US high-grade bond issuance to surge to $2.1 trillion, with $2 trillion likely to become the "new normal" going forward

JPMorgan said that large technology companies' continued ramping up of artificial intelligence (AI) infrastructure buildout, combined with elevated corporate refinancing needs, will drive US investment-grade bond issuance to a new record in 2027. Strategists at JPMorgan including Nathaniel Rosenbaum wrote in a research report released on Friday that US high-grade bond supply is expected to reach $2.1 trillion next year, surpassing this year's expected record issuance peak of $2 trillion. The strategists added that as the market continues to expand, annual issuance of $2 trillion or more may gradually become the norm. JPMorgan estimates that technology and media companies will be the main drivers of net new issuance next year, with combined bond issuance of up to $612 billion, accounting for nearly 30% of total investment-grade bond supply. Of that, hyperscale cloud providers will issue $225 billion, with another $225 billion in financing for data center construction and computing power chip-related financing transactions. Rosenbaum noted: "Bond supply will be highly concentrated in the sectors financing AI infrastructure, which also makes our overall forecast highly sensitive to the AI capital expenditure cycle." Although the bank expects merger-related bond supply to plunge 52% year-on-year after a big M&A year in 2026, the strategists also flagged a recovery in market risk appetite as an important upside risk that could drive M&A activity and overall issuance beyond expectations. On the other hand, Democrats gaining seat advantages in multiple key states after the midterm elections could mean local approval and development hurdles that may delay data center projects in 2028, thereby suppressing technology companies' bond issuance demand. In addition, if hyperscale cloud providers continue to shift debt issuance to foreign currencies and reduce dollar-denominated issuance, that would also weigh on dollar bond supply. Currently, Wall Street banks are clearly divided on the outlook for US high-grade bond issuance in 2027: TD Securities forecasts issuance will surge to a new record of $2.4 trillion next year, while Bank of America believes issuance will fall back to $1.9 trillion as cloud providers broaden financing channels and M&A activity cools.