Last week in bond markets, lower crude oil prices triggered a rally in US bonds, as yields declined on reduced energy inflation expectations. The two-year US treasury yield declined by 9 basis points to close the week at 4.09%. Separately, Canadian bond investors weighed the possibility of additional hyperscaler maple bond issuances—following a combined C$22.5 billion of maple offerings from Amazon and Alphabet in prior weeks. Lastly, SpaceX raised US$25 billion in its first public bond issuance and a major Canadian pension fund expanded its private credit investments.  

British Columbia Investment Management Corporation (BCI) committed C$1.8 billion to a new investment-grade private credit strategy, with plans to deploy a total of C$10 billion over the next three years, according to Bloomberg. Private credit typically provides investors with enhanced yield or total return potential versus publicly traded fixed income, reflecting an illiqudity premium as private assets often lack an active secondary market. By focusing on higher-quality, investment-grade private debt, BCI moves away from the highly-levered, higher-risk end of the private credit spectrum. This comes amidst broader investor concerns regarding lending standards, valuation transparency, and software loan exposure, underscored by rising private credit fund redemption requests over the last couple of years. 

As capital expenditures for AI infrastructure continue to rise, major hyperscalers like Amazon and Alphabet are increasingly tapping into global bond markets to raise capital and diversify across non-US denominated funding sources, broadening their investor base. For Canadian investors, these maple bonds—Canadian-denominated debt issued domestically by foreign entities, offered an opportunity to broaden portfolio diversification, as the Canadian corporate bond market is historically concentrated in the financials (including Canadian banks) and energy sectors. According to Bloomberg, strong demand for these maple bonds allowed Amazon and Alphabet to skip traditional roadshows typically used to gauge investor interest, which facilitated faster market access. Consequently, investors are now speculating whether other hyperscalers, such as Meta Platforms, might follow suit.

SpaceX executed a US$25 billion, five-part offering—its first public bond issuance since its initial public offering (IPO) earlier this month. These investment-grade bonds, rated BBB by S&P, featured maturities ranging from five to 30 years with fixed coupons between 5.35% and 6.65%. The bond proceeds were primarily earmarked to repay outstanding borrowings under the company's US$20 billion bridge loan facility. According to Bloomberg, the 10-year bond was priced to yield approximately 5.89%, roughly 0.40% higher than the average spread on similarly rated BBB corporate debt. This pricing likely reflects a higher investor premium due to SpaceX's BBB credit rating and limited public financial history, alongside investors expectations for sustained negative free cash flows and heavy capital spending in the years to come. Overall, the offer was significantly oversubscribed, attracting approximately US$89 billion in orders, with particularly strong demand for shorter-maturity bonds according to Bloomberg.