Transcript
Victor Forte: Welcome everyone back to Markets Mindset. I'm Victor Forte, Head of IG Capital Markets at Mizuho. And I'm here with, again, Moshe Tomkiewicz, Head of Debt Capital Markets here.
And Moshe, a lot has been going on in the market, you know, the war in Iran, new Fed chair, but we're sitting here on the eve of the rollout of another round of tech earnings. And what better thing to talk about than the impact that the increased tech supply has had on the market, and your views of where spreads are going to be going forward.
One of the things I wanted to focus on today was something that's kind of changed a little bit in the complexion of the market, was some of the issuance sectors that we've seen get real heavy lately, most notably the hyperscalers, right, in the tech space.
So think about it, year-to-date $1.3 trillion of issuance at this moment. Those numbers are up 102% on a net basis, 34% on an absolute basis, corporates up 41%. The numbers are holding steady, and we'll talk about that later at four plus times over subscription at about five basis point new issue concession, but the real thing is the issuance tied to AI, and obviously in the hyperscaler space, and when we look, you think about utilities, tech and communications, you have utility spaces up 47% year-to-date in issuance, tech up 117%, communications up 277%, so, the issuance is there, and we've seen the hyperscalers hit the market time and time again in multiple ways, but directly, obviously.
Talk to me about how that supply has changed the complexion of what's in the market, it’s changed the complexion of the indexes that people are looking at and the opportunities that they have.
Moshe Tomkiewicz: Great question, so tech is clearly the sector of focus for the market. And it's funny, when you go back and look at where we were, call it a year ago, when this tech supply first hit, it was a bit of a shock to the market, is a bit of a repricing for the market, but investors gradually got their arms around it, they looked at the balance sheet strength of most of these hyperscalers, they were looking at CapEx expenditures, which were up a lot, but they were manageable given the balance sheets that we were dealing with, so we built a big moat around tech.
Victor Forte: And we came into 2026, at least the market came in 2026, feeling like they had their arms around it.
Moshe Tomkiewicz: Correct.
Victor Forte: They knew what was coming.
Moshe Tomkiewicz: Correct, and what we didn't expect was that these CapEx expenditures were going to continue to get higher and higher and higher, and that they were going to continue to look at us to fund it, and then we were seeing a string of transactions that were coming out of the space that were underperforming in the secondary market. I know we'll talk about spreads later, but we've had a repricing of that sector.
So with those deals not going well, and with the supply dynamic continuing to increase out of the space, remember, when we think about tech, it's not just about hyperscalers, it's increasingly a multi-pronged phenomenon.
You have the hyperscaler universe, but now you have data center supply with a backlog of close to $100 billion of that. Then you need to fund the chips that are going to be housed in those facilities, and that could be three to five X of what the actual data center financing is.
And all these deals are being marketed off of the hyperscaler credit. That's a supply phenomenon that the market was not ready for.
Victor Forte: Well, let's look at those numbers, right? $54 billion approximate of 144A data center structured supplies have come to the market since the Beignet deal from last year. There is, by the time this actually airs, you'll probably have another $12 billion that'll hit approximately.
And then there's rumors of two other transactions that probably take us up somewhere around 80 to 90 billion at least of data center, 144A supply that has as its ultimate credit, yo-u know, the leases, the same hyperscalers you've been talking about. So it was interesting when we first had that issuance, as you do with a lot of structured or semi-structured issuance, there's a premium to the underlying credit that it starts out at and then it tightens in.
What we're seeing now is a little bit of softening in that because we've gone from people understanding the structure to now having to deal with the fact that they see what, a lot of supply coming down the road and it's hard to determine where is that supply supposed to end up to clear relative to the underlying credits, I would assume?
Moshe Tomkiewicz: Correct, correct. And I think your point about the index composition is an important one, because if you look at the market through that lens, there is room to run in this sector from a capacity perspective. I think the best comp for tech is the financials.
They're the biggest sector in the market, they issue in generally very big size. So that's a good one to look at. And they're about a little bit over 30% of the index where the hyperscalers are kind of mid single digit.
So through that lens, there's a lot of room. But that hyperscaler index doesn't include all the data center supply. And I think the way the financials approach the market relative to what we've seen in tech comes at the expense of capacity.
And what do I mean by that? Well, everybody knows when the banks are going to issue, they're going to issue right after the report. They're generally going to issue 10 years and in.
And so that gives investors a fair amount of time to position appropriately ahead of that issuance. And when they do that, that increases the likelihood that they're going to perform well. That's the exact opposite situation we've seen in tech.
How many surprise $25 billion deals have you seen in our space?
Victor Forte: —How many surprise CapEx announcements do you get?
Moshe Tomkiewicz: Exactly, exactly. So people aren't positioned for it. So the deals don't go as well as they should. And most importantly, they don't perform as well as they should. And that increases the likelihood that we start seeing a spillover effect into the broader market.
Victor Forte: So let's talk about that performance, right? We mentioned it before, which is, things seem to be in good stead. You had one of the big hyperscalers, obviously hit a lot of different currencies over the course of that time—
Moshe Tomkiewicz: A couple of them did—
Victor Forte: —diversified funding, right?
Moshe Tomkiewicz: —A couple of them did.
Victor Forte: You also had one who kind of moved more to equity after getting through a lot of debt.
There was a lot of diversification that was attempted by a lot of people. And we kind of ran into the end of May and sort of hit the tights. But if we look at what's happened since then, and we'll include the broader tech space too, you had the SpaceX transaction, which unfortunately is wider by 50 to 60 basis points at this time.
You've had each of the hyperscalers widen out anywhere from, call it 10 or 15 basis points to 20 to 30 basis points. Their curves have steepened over the last month and a half. Also lost 20 basis points plus in treasuries and 10-year treasuries since that moment in time.
The interesting thing, I think, about it has been as that space adjusts to the potential of more supply, the rest of the market has been pretty ring-fenced. When I think about it, yes, the overall index spread is above 75 right now we're sitting at 77, I think it was.
But that pull’s comes from a lot of the tech and hyperscale names. The rest of the market seems to be, I don't want to use the word oblivious to it, but it's been impregnable to kind of what's gone on in tech so far.
But as we talked about in the past, we've seen credits, I remember in the old days, GE, a lot of debt outstanding at one time for what they were, a AAA at that moment, traded wide of its name by 20, 30 basis points.
We had some telecom companies who had large debt complexes outstanding that traded wide. We now have a bunch of companies who will have probably bigger debt complexes than any of those names I just mentioned at some point in time. They're now trading wider than where their ratings are supposed to put them and trending the wrong way.
When do you think they've widened out? When do you think either they've gotten to the point where they can clear the kind of supply or where do you think the inflection point is where the rest of the market has to stand up and take notice on a relative basis?
Moshe Tomkiewicz: That's the question that every single strategist is trying to answer. And the only way you can really do it is look for signs, all right? And so one of the big signs, to your point, is how is non-tech going in primary, and more importantly, how's it trading in secondary? And so far, both of those boxes have been checked, which when we see that, that means the moat is holding.
Victor Forte: I thought when we talk about the tech space being kind of firewalled off to the side right now in terms of its performance, your team did a really good analysis of tech versus, I think it was healthcare because they've had a lot of larger deals, M&A, etc., over the last, call it, nine months plus. And the performance is striking between those two spaces, correct?
Moshe Tomkiewicz: Yes, because if you look at that analysis, you'll see those healthcare deals out-traded tech by close to 30 basis points, which in IG is a really big number. And why is that? Well, when the healthcare deals come, it's for a finite M&A, could be a big deal, but could also be a smaller deal, but the market knows exactly what needs to be funded and what does that represent of their funding need, all right?
Tech, you just don't know that. And Meta announces a $25 billion deal out of what? Because even if they told you out of, this will represent X percent, that number can change in a month.
Victor Forte: Right.
Moshe Tomkiewicz: And so that puts credibility much more on the side of healthcare versus tech, and that's why we're seeing the type of outperformance we've experienced.
Victor Forte: So we obviously are going to get through tech earnings season here is going to start, and that's going to really shape—
Moshe Tomkiewicz: Yeah, and I think—
Victor Forte: —the difference here.
Moshe Tomkiewicz: —I think it's important to note that we're filming this on the day of Google releasing after the bell. And the market, given all the price action that we've seen in credit, and recently in the equity market, the market is going to be very fixated on the CapEx guide from Google, as well as the other hyperscalers. And if we're in a situation that we see a really adverse reaction by credit on some of these announcements, that's a bad fact pattern for the equity market, because these guys are going to spend, and if we start raising up the yellow flag in credit, they're going to just lean on that much heavier on the equity market.
Victor Forte: Right, now, look, as you mentioned, by the time this airs, you're going to have started to get the tech rollout of earnings, and that will shape a lot of this. So let's go back and let's close this on a little bit more forward-looking, generic view of the world. So we have Labor Day, latest it can be, September 7th this year.
When you back up Labor Day, you don't back up blackout season. So you have a very compressed September for supply. Do you think that means we're going to have a pretty heavy August, as people try to pull forward if they can, to kind of get away from September?
And talk to me about, is that to just get away from September or is it to try to get as far in front of, maybe, midterms and other things going on right now?
Moshe Tomkiewicz: So I think August has a potential to be a record month for the market. I think part of that is driven by, obviously, the calendar, and I think it's more in terms of getting ahead of more tech supply and other supply than about the midterms. Given all the dynamics you talked about, I think spreads have hit a pretty hard floor.
So unless we start viewing 2027 as kind of peak CapEx for AI, unless we see a magical end to the war, I think it's going to be tough for spreads to pierce the tights we saw earlier this year.
Victor Forte: Right, and to put that in context for people right, we hit, what, 71 on the Bloomberg index in January. We were at 75, probably, sometime mid-May. We then came back down in and now we're back above 75 and trending the wrong way at this moment.
Moshe Tomkiewicz: Correct.
Victor Forte: So I'm going to summarize for you, you don't think there's really any end that you foresee right now to what's going on in Iran.
Moshe Tomkiewicz: Correct.
Victor Forte: Oil prices are back up at $84, VIX is inching back up, the MOVE index is back up a bit. You don't see any change in the Fed, given the data that's coming out. Hands are somewhat tied a bit to, kind of, do something. You think they're going to sit and wait?
Moshe Tomkiewicz: But if anything, they're going to lean in more hawkishly, just given what's going on in oil.
Victor Forte: So there's my question for you, you're not looking at a rate hike here in July—
Moshe Tomkiewicz: No.
Victor Forte: —but when do you think that rate hike possibly kicks in?
Moshe Tomkiewicz: I think September's a live meeting, which is why those couple of days after Labor Day have been such a discussion point with our borrowers looking at the market in that timeframe.
Victor Forte: Moshe, thanks again for being here. It was a pleasure as always. And I guess we'll be back together in about two months after the summer and after the Fed's meeting, and we'll take stock of what happened.
Until then, thanks everybody for joining here at Markets Mindset.
Moshe Tomkiewicz: Thank you.
Transcript
Victor Forte: Welcome everyone back to Markets Mindset. I'm Victor Forte, Head of IG Capital Markets at Mizuho. And I'm here with, again, Moshe Tomkiewicz, Head of Debt Capital Markets here.
And Moshe, a lot has been going on in the market, you know, the war in Iran, new Fed chair, but we're sitting here on the eve of the rollout of another round of tech earnings. And what better thing to talk about than the impact that the increased tech supply has had on the market, and your views of where spreads are going to be going forward.
One of the things I wanted to focus on today was something that's kind of changed a little bit in the complexion of the market, was some of the issuance sectors that we've seen get real heavy lately, most notably the hyperscalers, right, in the tech space.
So think about it, year-to-date $1.3 trillion of issuance at this moment. Those numbers are up 102% on a net basis, 34% on an absolute basis, corporates up 41%. The numbers are holding steady, and we'll talk about that later at four plus times over subscription at about five basis point new issue concession, but the real thing is the issuance tied to AI, and obviously in the hyperscaler space, and when we look, you think about utilities, tech and communications, you have utility spaces up 47% year-to-date in issuance, tech up 117%, communications up 277%, so, the issuance is there, and we've seen the hyperscalers hit the market time and time again in multiple ways, but directly, obviously.
Talk to me about how that supply has changed the complexion of what's in the market, it’s changed the complexion of the indexes that people are looking at and the opportunities that they have.
Moshe Tomkiewicz: Great question, so tech is clearly the sector of focus for the market. And it's funny, when you go back and look at where we were, call it a year ago, when this tech supply first hit, it was a bit of a shock to the market, is a bit of a repricing for the market, but investors gradually got their arms around it, they looked at the balance sheet strength of most of these hyperscalers, they were looking at CapEx expenditures, which were up a lot, but they were manageable given the balance sheets that we were dealing with, so we built a big moat around tech.
Victor Forte: And we came into 2026, at least the market came in 2026, feeling like they had their arms around it.
Moshe Tomkiewicz: Correct.
Victor Forte: They knew what was coming.
Moshe Tomkiewicz: Correct, and what we didn't expect was that these CapEx expenditures were going to continue to get higher and higher and higher, and that they were going to continue to look at us to fund it, and then we were seeing a string of transactions that were coming out of the space that were underperforming in the secondary market. I know we'll talk about spreads later, but we've had a repricing of that sector.
So with those deals not going well, and with the supply dynamic continuing to increase out of the space, remember, when we think about tech, it's not just about hyperscalers, it's increasingly a multi-pronged phenomenon.
You have the hyperscaler universe, but now you have data center supply with a backlog of close to $100 billion of that. Then you need to fund the chips that are going to be housed in those facilities, and that could be three to five X of what the actual data center financing is.
And all these deals are being marketed off of the hyperscaler credit. That's a supply phenomenon that the market was not ready for.
Victor Forte: Well, let's look at those numbers, right? $54 billion approximate of 144A data center structured supplies have come to the market since the Beignet deal from last year. There is, by the time this actually airs, you'll probably have another $12 billion that'll hit approximately.
And then there's rumors of two other transactions that probably take us up somewhere around 80 to 90 billion at least of data center, 144A supply that has as its ultimate credit, yo-u know, the leases, the same hyperscalers you've been talking about. So it was interesting when we first had that issuance, as you do with a lot of structured or semi-structured issuance, there's a premium to the underlying credit that it starts out at and then it tightens in.
What we're seeing now is a little bit of softening in that because we've gone from people understanding the structure to now having to deal with the fact that they see what, a lot of supply coming down the road and it's hard to determine where is that supply supposed to end up to clear relative to the underlying credits, I would assume?
Moshe Tomkiewicz: Correct, correct. And I think your point about the index composition is an important one, because if you look at the market through that lens, there is room to run in this sector from a capacity perspective. I think the best comp for tech is the financials.
They're the biggest sector in the market, they issue in generally very big size. So that's a good one to look at. And they're about a little bit over 30% of the index where the hyperscalers are kind of mid single digit.
So through that lens, there's a lot of room. But that hyperscaler index doesn't include all the data center supply. And I think the way the financials approach the market relative to what we've seen in tech comes at the expense of capacity.
And what do I mean by that? Well, everybody knows when the banks are going to issue, they're going to issue right after the report. They're generally going to issue 10 years and in.
And so that gives investors a fair amount of time to position appropriately ahead of that issuance. And when they do that, that increases the likelihood that they're going to perform well. That's the exact opposite situation we've seen in tech.
How many surprise $25 billion deals have you seen in our space?
Victor Forte: —How many surprise CapEx announcements do you get?
Moshe Tomkiewicz: Exactly, exactly. So people aren't positioned for it. So the deals don't go as well as they should. And most importantly, they don't perform as well as they should. And that increases the likelihood that we start seeing a spillover effect into the broader market.
Victor Forte: So let's talk about that performance, right? We mentioned it before, which is, things seem to be in good stead. You had one of the big hyperscalers, obviously hit a lot of different currencies over the course of that time—
Moshe Tomkiewicz: A couple of them did—
Victor Forte: —diversified funding, right?
Moshe Tomkiewicz: —A couple of them did.
Victor Forte: You also had one who kind of moved more to equity after getting through a lot of debt.
There was a lot of diversification that was attempted by a lot of people. And we kind of ran into the end of May and sort of hit the tights. But if we look at what's happened since then, and we'll include the broader tech space too, you had the SpaceX transaction, which unfortunately is wider by 50 to 60 basis points at this time.
You've had each of the hyperscalers widen out anywhere from, call it 10 or 15 basis points to 20 to 30 basis points. Their curves have steepened over the last month and a half. Also lost 20 basis points plus in treasuries and 10-year treasuries since that moment in time.
The interesting thing, I think, about it has been as that space adjusts to the potential of more supply, the rest of the market has been pretty ring-fenced. When I think about it, yes, the overall index spread is above 75 right now we're sitting at 77, I think it was.
But that pull’s comes from a lot of the tech and hyperscale names. The rest of the market seems to be, I don't want to use the word oblivious to it, but it's been impregnable to kind of what's gone on in tech so far.
But as we talked about in the past, we've seen credits, I remember in the old days, GE, a lot of debt outstanding at one time for what they were, a AAA at that moment, traded wide of its name by 20, 30 basis points.
We had some telecom companies who had large debt complexes outstanding that traded wide. We now have a bunch of companies who will have probably bigger debt complexes than any of those names I just mentioned at some point in time. They're now trading wider than where their ratings are supposed to put them and trending the wrong way.
When do you think they've widened out? When do you think either they've gotten to the point where they can clear the kind of supply or where do you think the inflection point is where the rest of the market has to stand up and take notice on a relative basis?
Moshe Tomkiewicz: That's the question that every single strategist is trying to answer. And the only way you can really do it is look for signs, all right? And so one of the big signs, to your point, is how is non-tech going in primary, and more importantly, how's it trading in secondary? And so far, both of those boxes have been checked, which when we see that, that means the moat is holding.
Victor Forte: I thought when we talk about the tech space being kind of firewalled off to the side right now in terms of its performance, your team did a really good analysis of tech versus, I think it was healthcare because they've had a lot of larger deals, M&A, etc., over the last, call it, nine months plus. And the performance is striking between those two spaces, correct?
Moshe Tomkiewicz: Yes, because if you look at that analysis, you'll see those healthcare deals out-traded tech by close to 30 basis points, which in IG is a really big number. And why is that? Well, when the healthcare deals come, it's for a finite M&A, could be a big deal, but could also be a smaller deal, but the market knows exactly what needs to be funded and what does that represent of their funding need, all right?
Tech, you just don't know that. And Meta announces a $25 billion deal out of what? Because even if they told you out of, this will represent X percent, that number can change in a month.
Victor Forte: Right.
Moshe Tomkiewicz: And so that puts credibility much more on the side of healthcare versus tech, and that's why we're seeing the type of outperformance we've experienced.
Victor Forte: So we obviously are going to get through tech earnings season here is going to start, and that's going to really shape—
Moshe Tomkiewicz: Yeah, and I think—
Victor Forte: —the difference here.
Moshe Tomkiewicz: —I think it's important to note that we're filming this on the day of Google releasing after the bell. And the market, given all the price action that we've seen in credit, and recently in the equity market, the market is going to be very fixated on the CapEx guide from Google, as well as the other hyperscalers. And if we're in a situation that we see a really adverse reaction by credit on some of these announcements, that's a bad fact pattern for the equity market, because these guys are going to spend, and if we start raising up the yellow flag in credit, they're going to just lean on that much heavier on the equity market.
Victor Forte: Right, now, look, as you mentioned, by the time this airs, you're going to have started to get the tech rollout of earnings, and that will shape a lot of this. So let's go back and let's close this on a little bit more forward-looking, generic view of the world. So we have Labor Day, latest it can be, September 7th this year.
When you back up Labor Day, you don't back up blackout season. So you have a very compressed September for supply. Do you think that means we're going to have a pretty heavy August, as people try to pull forward if they can, to kind of get away from September?
And talk to me about, is that to just get away from September or is it to try to get as far in front of, maybe, midterms and other things going on right now?
Moshe Tomkiewicz: So I think August has a potential to be a record month for the market. I think part of that is driven by, obviously, the calendar, and I think it's more in terms of getting ahead of more tech supply and other supply than about the midterms. Given all the dynamics you talked about, I think spreads have hit a pretty hard floor.
So unless we start viewing 2027 as kind of peak CapEx for AI, unless we see a magical end to the war, I think it's going to be tough for spreads to pierce the tights we saw earlier this year.
Victor Forte: Right, and to put that in context for people right, we hit, what, 71 on the Bloomberg index in January. We were at 75, probably, sometime mid-May. We then came back down in and now we're back above 75 and trending the wrong way at this moment.
Moshe Tomkiewicz: Correct.
Victor Forte: So I'm going to summarize for you, you don't think there's really any end that you foresee right now to what's going on in Iran.
Moshe Tomkiewicz: Correct.
Victor Forte: Oil prices are back up at $84, VIX is inching back up, the MOVE index is back up a bit. You don't see any change in the Fed, given the data that's coming out. Hands are somewhat tied a bit to, kind of, do something. You think they're going to sit and wait?
Moshe Tomkiewicz: But if anything, they're going to lean in more hawkishly, just given what's going on in oil.
Victor Forte: So there's my question for you, you're not looking at a rate hike here in July—
Moshe Tomkiewicz: No.
Victor Forte: —but when do you think that rate hike possibly kicks in?
Moshe Tomkiewicz: I think September's a live meeting, which is why those couple of days after Labor Day have been such a discussion point with our borrowers looking at the market in that timeframe.
Victor Forte: Moshe, thanks again for being here. It was a pleasure as always. And I guess we'll be back together in about two months after the summer and after the Fed's meeting, and we'll take stock of what happened.
Until then, thanks everybody for joining here at Markets Mindset.
Moshe Tomkiewicz: Thank you.
With year-to-date issuance up significantly in both tech and communications, will the surge of AI hyperscalers continue to alter the complexion of the market?
In our latest episode of Markets Mindset, filmed on July 22, 2026, Mizuho’s Head of Investment Grade Capital Markets and Syndicate, Victor Forte, is joined by Head of Investment Grade Debt Capital Markets, Moshe Tomkiewicz, to analyze the shifting landscape ahead of a major tech earnings rollout.
Their conversation centers on the unprecedented shifts in debt supply from AI-driven hyperscalers, how this is forcing a credit spread repricing of the tech sector and its impact on broader market dynamics.
Throughout the episode Victor and Moshe discuss:
How is hyperscaler supply reshaping credit market spreads?
As annual CapEx projections skyrocket toward multi-hundred-billion-dollar levels, massive tech platforms (“hyperscalers”) have turned aggressively to the debt markets for data center and AI infrastructure financing.
Hyperscaler debt issuance has turned high-grade tech debt from an asset class defined by scarcity and tight spreads into a primary source of supply-driven spread widening.
What is the impact of AI-driven data center expansion on debt capital markets?
As internal cash flows can no longer fully cover the massive capital requirement for AI-driven data centers, borrowing has shifted across public bond markets, private credit, structured finance and utility debt.
Victor and Moshe discuss how debt capital markets were unprepared for this “supply phenomenon", and how they have reacted.
Why is tech CapEx volatility driving bond investor caution?
When tech companies announce massive, unpredictable spikes in CapEx to build out AI infrastructure and data centers, bondholders look at immediate balance sheet dilution and supply pressure.
In the episode, Victor and Moshe explain why the market can no longer predict the volume or timing of issuance, and how this uncertainty impacts deal performance.
What is the post-tech earnings outlook for corporate debt issuance?
The post-tech earnings window marks a high-volume period for corporate bond markets. Rising CapEx guidance leads to primary supply concessions, curve steepening and expanded use of private credit alongside traditional corporate debt.
In their discussion, Victor and Moshe highlight the impact of CapEx guidance from hyperscalers, the risk of an adverse reaction in the market and their outlook for a potentially record-heavy August and post-Labor Day predictions given the compressed supply window.
