00:00Let's start with Ronan. Tell me a little bit more about IBM kicking off this big tech bond sale because it had just reported earnings as Nora had told us.
00:08And we know that this tends to be a busy period for tech related credit issuance.
00:14Yeah. So it's interesting that we've kind of had a record year so far for bond issuance in Europe and I think in the U.S. as well.
00:22And this is even without the kind of big tech names that have been the fabled and kind of much talked about part of going into 2026.
00:30And then so IBM, like you said, was straight out of the gates this morning with its bond issuance in Europe after its earnings yesterday.
00:37It is priced a three point five billion deal and investors were lapping this up.
00:43There's 17.7 billion of demand across the tranches. It's done really well.
00:48And I think they'll be very happy with it. And it's part of kind of kicking off that big, big tech bond sale trend that we've been waiting for and looking for.
00:57And it's what's going to be coming in the next few weeks, I think.
00:59Absolutely. So, Robert, let me bring this to you.
01:02This flood of issuance comes on top of a lot of issuance already tied to the build out of the AI infrastructure.
01:08We've seen all these big tech names sell a lot of debt and it's been absorbed pretty easily so far.
01:13Spreads are really, really tight. But as more companies issue more debt, like an IBM that maybe was not anticipated,
01:22isn't that going to have at some point have an impact on credit spreads?
01:25Yeah. Last year was a historical high and we did see a little bit of spread widening.
01:30Tech spreads had traded historically well inside of where the corporate index was.
01:34And we backed up 10 or 15 basis points and now are trading pretty much on top of where corporates are.
01:40IBM is pretty much just the tip of the iceberg here.
01:43I think we're going to probably see more than $200 billion on an adjusted basis when we think about both public and private debt this year.
01:51But like Ronan said, extremely well absorbed.
01:54I mean, IBM is going to do a 30 year bond inside of 100 basis points.
01:58Demand for high quality tech is voracious.
02:03And I think the constant news flow that we are in a bubble and that everybody is worried is much more of an equity story than it is a credit story.
02:12So when you, Ronan, look at these companies that are getting ready to issue this debt and you look at what they're saying in earnings calls,
02:19how are you thinking about what credit investors are listening to and listening for to determine whether these are good issuances relative to what they might already have in their portfolio?
02:30Yeah. So actually kind of in Europe, especially tech makes up a pretty small part of the index right now.
02:37The kind of European investors are quite underinvested perhaps in tech on maybe compared to a global scale.
02:44And I think for a lot of investors, these are going to be kind of exciting names that they're able to get their hands on.
02:50And part of the kind of appeal, so to speak, of the tech names is actually some of them are quite spread agnostic.
02:58They've got so much debt to raise, so much like money in CapEx that they need to spend,
03:03that they're going to be willing to pay a little bit more of a premium on the deals to get them over the line and to raise these kind of big sizes.
03:11I think IBM could just be, as you said, could be just the tip of the iceberg in terms of some of these deals.
03:17End of last year, Alphabet did some really, really large deals that were really well received with investors.
03:22And as far as we're all hearing, it's going to be more.
03:25And then on the investor side, they've got so much cash to spend.
03:29Cash just keeps rolling into fixed income for a variety of reasons.
03:33And there's so much cash to be put to work here.
03:35So Reda makes a good point, which is investors in Europe are maybe under-owned in tech bonds, tech credit,
03:42because they don't have a lot of tech companies there.
03:44And maybe a lot of U.S. companies aren't issuing euro debt.
03:47But I wonder, in the U.S., all this tech debt coming through, are they going to be overexposed to tech as opposed to other sectors?
03:55I mean, does that create a concentration risk?
03:57Well, listen, this tsunami wave of tech issuance is going to spread overseas.
04:02We are going to see the biggest and best issue in euros, maybe in yen, in a variety of other currencies.
04:10So I think you're going to see that more to diversify their borrowing sources.
04:13But I think we have to remember, like, the type of names that are coming.
04:16You know, I've used the Mount Rushmore of credits.
04:18These are the goats of credit.
04:20I mean, Microsoft is the goat, AAA rated.
04:23There is a ton of room for people to put money into names like that.
04:27So regardless of how much spending is going up, and I think it's going higher.
04:31I mean, we originally thought last year that AI capex spending over the next five years was going to be $2 trillion.
04:38We raised that by the end of last year to $3 trillion.
04:41What we're seeing with names like Meta already dramatically boosting what the capex spending is going to be this year,
04:47you know, that number could end up being $4 billion.
04:49And a lot of that's going to be on the back of bondholders,
04:51but it's going to be within the companies that are rated AA and AAA that have more than enough room.
04:57And again, I think investors can't wait to waive in more bonds.
05:02You mentioned AA or AAA.
05:04Those are investment-grade ratings.
05:05Is there any chance that maybe their ratings might deteriorate a bit with this flood of issuance?
05:11I think not.
05:11You know, if you move down the credit curve, that's where some of the risk is.
05:15Names like BBB names like Oracle that are meaningfully negative free cash flow post their capex spending
05:21or the core leaves of the world that don't generate any free cash.
05:25But, you know, these type of names like the Microsofts, Metas, Googles, Amazons are sitting on $60, $80, $100 billion of cash,
05:35and they're generating like amounts of cash.
05:38Even after spending $30, $40, $50, $80 billion in shareholder returns,
05:43they're still going to be free cash flow positive.
05:45So, no, I just don't really see those sort of concerns.
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