Monthly Bond Commentary - February 2026

AI infrastructure capex dominated the narrative last month in both equity and bond markets. Equities sold off in two sections: firstly the hyperscalers (who are expected to spend $400bn on capex this year) as investors struggle to see a high return on such enormous investment; and secondly, software companies dropped over concerns AI will replace their businesses, surely meaning hyperscalers should capture this revenue. This market is far from efficient. However, in spite of equity weakness, hyperscalers dominated primary bond markets. Oracle priced $25bn of bonds and attracted the largest ever order book of $129bn. Just days later Alphabet (parent of Google) followed on by issuing $30bn across three currencies including a rare sterling century bond. This is the first such bond to be issued by a technology firm since the 1990's and the £1bn issue brought orders of £9.5bn.

We have and continue to see significant value in bond markets, despite the recent compression in spreads and interest rate cuts - demand in primary markets supports this thesis. Of course, the world has changed since the end of the month following the US and Israeli war in Iran. However, primary bond markets are still on a tear. In mid-March Amazon borrowed $37bn for the largest non-M&A bond deal in history, and the fourth largest ever, which happened to fall on the busiest single session in primary markets. To add to this Amazon received an order book of $126bn, just $3bn shy of Oracle's record book a month before. Primary markets often act as a bellwether and we take confidence that this strength permeates the wider market and bonds will continue to receive a bid in the face of geopolitical uncertainty.