STOCKS | AI Debt Boom Narrows Credit Spreads Between Emerging Markets and U.S. Firms

U.S. large-cap technology companies are borrowing heavily, and bond investors are starting to view some emerging-market peers as safer bets. According to Sina Finance, SK Hynix’s bond due in 2031 yields only 9 basis points more than Amazon’s, down to one-third of last year’s level, while the cost of hedging the Korean company’s credit risk is even lower than that of many U.S. tech giants. The shift is not limited to individual companies. According to Sina Finance, the risk premium on emerging-market corporate bond indexes has converged with that of comparable U.S. benchmarks for the first time on record, while the core driver behind the narrowing spread is explosive growth in AI-related financing. According to Sina Finance, Zurich Insurance market strategy head Punit Sharma said emerging-market spreads could narrow further and that he would not be surprised if they eventually fell below those of developed markets. Sharma said emerging-market debt is a passive beneficiary of the U.S. AI borrowing boom, and that large cloud-service providers are increasingly priced for expectations of massive future issuance. JPMorgan index data showed the spread gap between emerging-market corporate debt and U.S. corporate debt versus Treasuries has narrowed to just a few basis points, compared with a historical average of 30 to 50 basis points. According to Sina Finance, JPMorgan strategists Hong Liangming and Alyssa Myers said in a note to clients that the two spreads are expected to fully converge by year-end. At the company level, Tencent Holdings and Apple were cited as examples, while TSMC and Meta were also compared. According to Sina Finance, Tencent’s 2031 bond has an excess yield roughly in line with Apple’s comparable-maturity bond, and TSMC’s 2031 dollar bond yields nearly 20 basis points less than Meta’s similar bond, after having traded about 25 basis points wider two years ago.