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Another week, another jumbo tech deal to fund artificial intelligence data centers.

A $15bn bond package from Amazon on Monday (17 November) was the latest addition to the glut of AI hyperscalers tapping the IG bond market following similar deals from Oracle, Meta and Alphabet that have brought $88bn USD-equivalent to the primary since September, according to 9fin data.

The six-part trade was Amazon’s first since 2022 and its largest deal since pricing an $18bn bond package in 2021. However, despite attracting around $80bn of initial orders, demand proved to be a bit soft for the retailer and cloud services provider as the book saw attrition of around 50% through price progression, sources told 9fin.

Bankers said book attrition across the market has intensified in recent weeks in part because the deluge of supply has allowed investors to be more selective. A debut Euro deal for Unilever’s spin out of Magnum Ice Cream saw similar levels of attrition as banks felt out appropriate pricing levels.

But even though this was a softer week than most, at the end of the day deals are still 3x oversubscribed with minimal concessions.

“A part of me says, big deal, who cares?” one banker said. “As you bring it towards fair value, investors get more price sensitive and they jump out, and especially with Amazon people know there's probably going to be another Amazon deal next year.”

Credit spreads held firm for Amazon in the secondary even as equities sold off on concerns that Nvidia’s earnings would disappoint, rallied when Nvidia outperformed and then the stock market retraced those gains when investors decided they were still concerned about over-bloated AI spending.

Amazon credit spreads were mostly flat since pricing but the various tranches did open Friday anywhere from 2bps in from pricing levels to 4bps wide. It has been a roller coaster week and we tried to capture some of the ups and downs here.

In all, $44.8bn priced on the week from 28 issuers bringing November issuance up to $133bn. Not only is that already $38bn above last year’s November supply with another week to go in a holiday shortened Thanksgiving week, but it’s also already far and away the largest November supply ever, according to 9fin data going back to 2005.

The market has ultimately taken it down in stride but spreads have moved wider. Average triple-B spreads were up to around 107bps over Treasuries, which is a new high not seen since June, according to ICE BofA data.

Our team met with bankers and investors in London this week and it’s clear that the market is still coming to grips with the amount of issuance priced over the last four weeks and, more importantly, the next $1.5trn of projected IG bond debt needed to fund AI capex spend over the next five years (that’s an extra $300bn per year).

This year it all came in one unexpected bunch, and perhaps there is still more to come before the year is over. But sources said they are hopeful that next year the issuance will be more spread out and investors will be better prepared.

“It was a very large quantum of supply in a short period of time,” one investor said. “They are such high-quality issuers that they don’t speak to banks before they announce, which added to the element of surprise.”

Pharma and financials

Pfizer led the way for the non-AI related cohort with a seven-part deal to fund its acquisition of Metsera as the American pharma company looks to become a third player in the accelerating GLP-1 weight loss space.

The $6bn bond package came a day after Amazon’s and was none the worse for wear as spreads tightened by 25bps-30bps across maturities stretching out as far as 40 years to 2065.

Pfizer had to pay up for the acquisition amid a bidding war from Novo Nordisk, which similarly issued €4bn notes last week to fund recent acquisitions. Metsera ultimately settled on Pfizer’s sweetened deal for regulatory reasons as 9fin wrote this week.

Last week’s pulled deal from IT services company DXC Technology (Baa2/BBB-/BBB-) seemed to have little impact on deal flow this week.

Five subordinated notes with BBB- or lower ratings from southern banking services provider Trustmark, natural gas company Spire Missouri, retirement and insurance company Global Atlantic Financial and regional bank Western Alliance each priced this week — all tightening in from IPTs or at least to the lower end of the given range. New SUNs from Hyatt (Baa3/BBB-/BBB-) similarly performed well tightening by 28bps for a $400m 10-year note.

Strong pricing on those lower rated notes suggests there’s still some risk-on sentiment in the investor base.

The first jobs report from the six-week government shutdown delay was mostly positive as the US economy added 119,000 jobs — more than double the expected figure. Even so, unemployment hit highs not seen since 2021 and the Bureau of Labor Statistics said it will not release an October jobs report opting instead to release the data alongside the regularly-scheduled November jobs report that will hit screens in mid-December.

More delayed economic numbers will be released in the weeks to come and will surely influence the level of opportunistic issuance to be done in credit markets, sources said this week.

But with the holidays around the corner and new risks emerging it’s hard to say what supply looks like to year-end.

“I'm worried that some of these recent deals might shut down the market early,” one European banker said. “You're seeing these monster jumbo deals come at the time when spreads have actually widened a little bit with some of the equity volatility coming and with big concessions that can risk resetting the secondary market — so you risk people saying, ‘We're done for the year.’ That would be unfortunate because I still think there's a good few weeks left.”