The US Dollar Credit Market is Booming, But Are We Heading for a Bubble?
The US dollar credit market showed no signs of slowing down in October, with a surge in corporate bond issuance that’s raising eyebrows—and questions. But here’s where it gets controversial: while the numbers look impressive, could this be a sign of overheating, or is it simply a reflection of strategic financial planning? Let’s dive in.
A Robust October for Corporate Issuance
October saw corporate bond issuance hit a staggering US$98 billion, slightly below September’s US$119 billion but still a standout figure compared to previous years. This makes it the third-largest monthly issuance of 2025, trailing only March and September. Year-to-date (YTD), corporate issuance has already surpassed 2024’s total of US$753 billion, reaching US$790 billion—second only to the record-breaking year of 2020.
And this is the part most people miss: the bulk of October’s supply was concentrated in longer maturities, particularly the 9-12 year and 17+ year buckets. Companies issued US$19.2 billion in the 9-12 year range and a whopping US$48.4 billion in the 17+ year range. This trend underscores a clear strategy: locking in long-term funding while interest rates remain stable. But is this a prudent move, or are companies betting too heavily on a low-rate environment?
Tech Giants Lead the Reverse Yankee Charge
One of the most intriguing developments in November was Alphabet’s €6.5 billion six-tranche bond deal. This wasn’t a surprise, given the flood of US tech companies issuing Reverse Yankee bonds in the EUR market this year. Here’s the kicker: these issuers are capitalizing on tighter and outperforming EUR spreads compared to USD spreads, offering significant cost savings. YTD, Reverse Yankee supply has already hit €64 billion, and we’re not done yet.
Looking ahead to 2026, we expect this trend to continue, with Reverse Yankee supply projected to reach €80 billion. Tech companies financing AI and cloud infrastructure projects will remain the driving force. But as USD spreads continue to underperform and cross-currency basis swaps stay in negative low single-digit territory, one has to wonder: how sustainable is this strategy in the long run?
Financial Supply on the Rise—But at What Cost?
October also saw a second consecutive monthly increase in financial supply, with bank senior issuances climbing to US$36 billion—an US$8 billion jump from September. With redemptions remaining high, the primary market is expected to stay active in November.
Meanwhile, the capital segment saw US$5.5 billion in issuances, a US$3 billion drop from the previous month but in line with October 2024 figures. The most dramatic increase, however, was in the finance segment, where issuances more than doubled to US$34 billion compared to September.
Now, the million-dollar question: Is this surge in financial supply a sign of confidence, or are institutions leveraging low rates before they inevitably rise?
Final Thoughts: A Boom or a Bubble?
The US dollar credit market is undeniably thriving, but the concentration in long-term maturities and the reliance on cross-currency strategies raise important questions. Are companies and financial institutions making smart bets, or are they setting themselves up for future challenges?
What do you think? Is this a sustainable boom, or are we on the brink of a bubble? Share your thoughts in the comments—let’s spark a conversation!
