Inside Credit Market’s Issuance Boom and Private Lending Risks

March 27, 2026

AI Summary

5 min read

Andrew Sheets and Vishwas Baker from Morgan Stanley discuss two pressing issues in global credit markets: a surge in corporate bond issuance and rising concerns over private credit risks.

Record Issuance Forecasts Holding Up

At the start of the year, Morgan Stanley forecasted record gross investment grade (IG) issuance of $2.25 trillion, 25% above last year, and $400 billion in high yield (HY), up 30%. Through mid-March, IG issuance rose 21% and HY 25%, aligning with expectations. Key drivers include over $80 billion in dollar-denominated issuance from hyperscalers for AI infrastructure, plus non-USD deals, and an uptick in M&A activity. This supply persists despite macro volatility, marking a shift where AI-related capex appears somewhat agnostic to economic conditions.

Characteristics of the Issuance Wave

Issuance stems from competitive investments in the AI "arms race," not opportunistic timing. A notable feature is its spread-agnostic nature: new issue concessions—excess funding costs over existing bonds—are above average, even for large deals. This large-scale, wide issuance from AI leaders creates knock-on repricing effects for downstream companies. Issuers prioritize growth over cost, keeping the market open amid concerns like Middle East tensions.

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What you'll learn

1 (00:00) **Intro and Episode Overview** - Hosts introduce themselves and outline topics: credit issuance boom and private credit risks
2 (00:24) **Issuance Forecast Review** - Year-start prediction of record $2.25T IG issuance (25% YoY up) and $400B HY (30% up) tracking as expected through Q1
3 (01:28) **Key Issuance Drivers** - AI capex from hyperscalers and M&A uptick confirmed, with $80B+ USD issuance from hyperscalers alone
4 (02:08) **AI Issuance Characteristics** - Driven by competitive "arms race," spread-agnostic with above-average new issue concessions
5 (03:29) **Shift to Private Credit Concerns** - High public issuance absorbs supply amid Iran conflict, but private credit draws headlines and volatility
6 (04:02) **Defining Private Credit** - Non-bank, non-syndicated lending including direct lending, infrastructure, project finance, private placements, asset-based
7 (05:32) **Rising Investor Worries** - Macro yield compression, flat AUM, narrowing spreads since H2 2023; idiosyncratic headlines like double-pledging

+ Full timestamped outline available in the app

Show Notes

Our Global Head of Fixed Income Andrew Sheets and Head of U.S. Credit Strategy Vishwas Patkar discuss what’s driving record debt issuance and growing worries about private credit.

Read more insights from Morgan Stanley.

----- Transcript -----

Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley.

Vishwas Patkar: And I'm Vishwas Patkar, Head of U.S. Credit Strategy at Morgan Stanley.

Andrew Sheets: And today on the program, we're going to talk about two of the biggest questions facing global credit markets. A rush of issuance and questions around private credit.

It's Friday, March 27th at 2pm in London.

Vishwas, it's great to have you in town, talking over what I think are two of the biggest questions that are hanging over the global credit market. A large wave of issuance and a lot of questions around a segment of that market, often known as private credit.

So, let's dig into those in turn. I want to start with issuance. You know, you and your team had a pretty aggressive forecast at the start of the year, for a significant level of supply. How's that going? How is it shaping out? We're now almost through the first quarter…

Vishwas Patkar: Yeah. So, we came into the year expecting a record, [$]2.25 trillion of gross issuance in investment grade. That's 25 percent higher than last year. That would mark a record one year number for investment grade. And for the high yield market, we expected about [$]400 billion of issuance; up roughly 30 percent.

If I were to mark to market those, the forecast is roughly playing out as expected through mid-March. IG issuance is up about 21 percent. High yield issuance is up about 25 percent. So far at least, it's along the lines of what we'd call for. More importantly though, when I think about the drivers of the issuance, that I think in some ways is a little more validating. Because there were two big components of what was going to drive the issuance.

One was AI related issuance from the large hyperscalers, and the second was a decent uptick in M&A. And we've seen both of those. So, year-to-date, we've had north of [$]80 billion of issuance from hyperscalers alone in the dollar market. That's on top of significant non-USD issuance that we've had this year.

So, I think this idea of AI CapEx investments and by extension issuance being somewhat agnostic to macro, that seems to be playing out so far.

Andrew Sheets: So, let's talk a little bit more about that – because, you know, this is a new development. This kind of is a new regime to have this much supply, sort of, somewhat independent of a very volatile macro backdrop.

And you know, maybe if you could talk just a little bit more about what we're learning about the issuers. What do they care