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Wall Street's Six Biggest Banks Expected to Issue ~$41B in Bonds This Quarter to Fund AI Boom
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Wall Street's largest banks are expected to continue a borrowing surge in the fourth quarter, issuing more bonds than usual to raise capital for financing the massive spending demands of the artificial intelligence boom. Barclays analysts estimate the six largest U.S. banks will issue about $41 billion in bonds this quarter, 30% above the fourth-quarter average since 2015. In the third quarter, senior debt issuance reached $50 billion, more than double the year-ago level. According to a Barclays report on October 1, banks are increasing borrowing not only to fund AI buildouts and hundreds of billions in spending by tech giants like SpaceX and Oracle, but also to support increased trading and market activity tied to industry growth. The analysts noted the supply wave has been 'digested relatively well' with bank debt yield premiums stable, giving banks incentive to continue raising funds as AI demand grows. The report states banks typically enter the market after quarterly earnings, which begin next week with Wells Fargo, JPMorgan, Goldman Sachs, and Citigroup reporting on October 13, followed by Morgan Stanley and Bank of America. Year-to-date global borrowing by these banks has reached $192 billion, up about 40% year-over-year, with a full-year total projected at $233 billion. However, rising benchmark borrowing costs and growing credit concerns about hyperscalers and other tech borrowers may temper excessive debt increases.
Source report
Source: Bloomberg
Wall Street's largest banks are expected to continue their recent borrowing surge in the fourth quarter, issuing more bonds than usual to raise capital for the massive financing needs driving the artificial intelligence boom.
According to analysts at Barclays, the six largest U.S. banks are projected to issue approximately $41 billion in bonds this quarter — 30% higher than the average fourth-quarter issuance since 2015. In the third quarter, senior debt issuance reached $50 billion, more than double the level from the same period last year.
In a report dated October 1, Barclays analysts noted that banks are increasing borrowing not only to fund AI infrastructure and the hundreds of billions in spending by tech giants such as SpaceX and Oracle, but also to support the rise in trading and market activity accompanying industry growth. They stated that the wave of supply has so far been "absorbed relatively well," with bank debt yield premiums remaining stable, giving banks incentive to continue building reserves as AI demand grows.
"We expect the six largest banks to return to the market in the fourth quarter, as funding is critical to capturing opportunities related to AI activity," the analysts wrote. They added that potential delays in tech-related IPOs could limit issuance volumes.
Banks typically enter the market after reporting quarterly earnings. The earnings season begins next week, with Wells Fargo, JPMorgan Chase, Goldman Sachs, and Citigroup reporting on October 13, followed by Morgan Stanley and Bank of America the next day.
Barclays strategists' data shows that year-to-date, these banks have borrowed $192 billion globally, an increase of approximately 40% year-over-year, with the full-year total expected to reach $233 billion. Overall senior debt issuance for U.S. banks is projected at $294 billion for the year — 25% higher than initial estimates and above the $240 billion forecast for 2025.
According to Bloomberg Intelligence analysts, among the six largest banks, Goldman Sachs and Morgan Stanley are leading in 2026 issuance and are likely to be the most active borrowers following next week's earnings reports.
While banks have been strategic in their borrowing timing, recent increases in benchmark borrowing costs may curb excessive debt accumulation. Meanwhile, growing credit concerns about hyperscalers and other tech borrowers reflect increasing unease over the debt buildup required to support massive AI spending.
In a separate report, JPMorgan Chase forecast $24 billion in U.S. bank supply for October, noting that Wells Fargo and Citigroup had already raised $18 billion through off-cycle issuance last month, with Citigroup completing a record $12 billion bond sale. Strategists said they do not expect these banks to issue after earnings, and Bank of America may also stay out of the market, meaning most issuance will come from Morgan Stanley and Goldman Sachs.
Original article: Bloomberg
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