In bond markets, US and Canadian shorter-to-medium-term government bonds rallied, stoked by optimism that the Iran war may soon subside, and a draft proposal for Hormuz Strait traffic from Iran’s IRNA deputy minister. This was all on the uncertain backdrop of President Trump’s plans to hit Iran "extremely hard” in the coming weeks. US manufacturing prices hit their highest levels since 2022. Combined with a record rise in gasoline prices, this data illustrates how the conflict in Iran is beginning to impact consumers. These factors have bolstered inflation expectations and driven government bond yields higher over the past month. Additionally, US treasury bonds are being sold off in larger quantities by foreign central banks, as countries attempt to prop up their economies and currency amidst the war, with the New York Federal Reserve data showing the lowest foreign bank treasury holdings since 2012. Lastly, private credit asset manager, Blue Owl, witnessed a record USD$5.4 billion in quarterly redemption requests. 

The private credit industry has been rattled by mounting investor withdrawals, the activation of redemption gates, and fraud allegations. Rising redemption requests suggest investors are growing nervous about AI-disrupted software exposure, lending practices, and infrequent liquidity/valuation of these funds. Private credit funds, while paying investors a premium for this illiquidity, are often misunderstood due to their restrictive capital lock-up periods and strict redemption guidelines. Last week, Blue Owl imposed withdrawal caps of 5% on two funds following outsized redemption requests. The quarterly redemption requests amounted to 22% of Blue Owl’s USD$36 billion private credit fund (OCIC) and 41% for a separate technology-focused fund (OTIC). The response of these semi-liquid fund structures with backlogged quarterly redemption requests (far exceeding caps) will be especially telling, specifically whether these funds may need to sell assets at discount or are forced to wind down.  

In corporate news, Related Digital looked to finalize a USD$16 billion financing arrangement for an Oracle Corp. data centre in Michigan to power OpenAI applications, of which an estimated USD$14 billion will be raised by debt financing led by the Bank of America. There was previously scrutiny around this project's massive power demand footprint, and it was originally proposed as a construction loan whereas it may now include a new bond sale. Oracle’s cost of borrowing has been rising higher since the start of the year, as witnessed by the five-year credit default swap (cost of default protection) spreads moving past 1.82%. Investors have become wary of the company’s heavy debt load in a fast-paced AI data centre spending environment. Another notable debt arrangement came from Intel Corp, which looked to repurchase Apollo's stake in its Irish semiconductor plant for USD$14 billion, using cash on hand and issuing an estimated USD$6.5 billion in new debt. Apollo had previously paid USD$11.2 billion for the 49% stake of a joint venture, and Intel used the proceeds for new production technology. Shares of Intel jumped on the news and confidence that its products can play a large role in the AI infrastructure spending boom. Third-party credit rating agency Moody’s said the plans by Intel are also credit positive, with expectations for the transaction to be accretive to earnings per share while strengthening credit profile in 2027 and beyond.