Data-center Debt and Meta $25B Offering Reshape Bond Market

Jason Greenblath, vice president and director of corporate credit research at American Century Investments, said roughly $75 billion of data-center debt entered the market in April, including a $25 billion Meta offering on the final day of the month. The supply surge produced pricing dislocations at both ends of the credit curve.

The wave included several high-yield deals and raised the stock of technology-related corporate debt available to investors. Higher supply pressured prices and altered relative value across credit sectors and maturities.

At the lower end of the curve, borrowers rated in the triple-C range do not yet have bond prices that fully reflect a potential economic slowdown, leaving that cohort exposed if financing tightens or earnings decline. At the top end, increased supply of higher-quality debt has cheapened some investment-grade paper and widened spreads, creating entry points for buyers.

Geopolitical tensions around the Strait of Hormuz and a jump in oil prices were a second factor affecting market tone. Greenblath noted that corporate and consumer fundamentals have held up so far. He added, “I think what we’ve seen in the month of April is resilience so far and fundamentals, both corporate fundamentals and consumer. And despite the oil shock, I think fundamentals remain intact for now.”

Sector patterns varied. Airlines have struggled with higher fuel costs. Business development companies attracted attention because their debt typically matures sooner, which reduces interest-rate exposure. American Century increased risk exposure in March when valuations looked more appealing, then reduced exposure in April as prices recovered and spreads tightened.

The firm is buying very short-dated one- to two-year BDC debt from selective borrowers and selective airline debt in North America, Latin America and some emerging markets.

Employment remains the largest downside risk under watch. Greenblath warned, “We’re watching for big layoffs. Certainly some of the big Silicon Valley technology companies have announced tens of thousands of job losses or restructuring. So we’re keeping a very close eye on that. I think that’s probably the biggest risk.”

American Century’s actively managed corporate bond ETF charges 29 basis points and has recorded more than $250 million in net inflows over the past 12 months. The firm is scanning the market for selective opportunities in short-dated securities and cheaper investment-grade issues.