US primary credit market competition hits record high as bond demand surges

Tuesday saw ⁠software ⁠stocks stage something of a rally, weirdly driven by the thing ⁠that’s beaten them down for the past month: a sweep of new plug-ins from AI lab Anthropic.

This time around, the market focused more on ​the partnerships between some of these companies and Anthropic, rather than the existential threat AI could pose.

I’ll get into that and more below.

But first, check out my latest column on why AI isn’t the only thing driving the ‌global economy.

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Even though many software stocks caught a break yesterday, others affected by ⁠Anthropic’s new tools were less ⁠fortunate. HR software firm Workday fell 10% overnight, with a downbeat revenue forecast aggravated by the fact that HR tasks ​were listed among the targets of Anthropic’s new gizmo.

While the broader rebound may not address what the viral scare stories suggest will be a wipeout of white collar workers, it does suggest that perhaps many of these companies may survive and thrive with AI after all.

U.S. primary credit markets ⁠are ⁠now the most competitive ⁠on record, based on Barclays’ analysis of over ​one million investor records since 2017, driven by high demand for ‌new corporate bonds.

The increased ‌demand led to tighter allocations and heavier early-stage trading, ⁠as indicated ⁠by reports submitted to the Financial Industry Regulatory Authority’s (FINRA) ​system for reporting over-the-counter transactions in fixed-income securities.

A dataset constructed by Barclays from this system, Trade Reporting and Compliance Engine (TRACE), showed that issuances ​have increasingly “sold out” across a broader and more diverse investor ⁠base.

Barclays ⁠cited a mix of ⁠structural ​and cyclical forces, including a larger pool of funds competing for new-issue ​allocations, stronger foreign ⁠demand and higher coupons since the Federal Reserve’s 2022 rate liftoff, which have increased reinvestment needs.

Competition in the first half of 2025 was about 15% higher in investment-grade debt and ⁠roughly 30% higher in high-yield compared with 2017, a period already ⁠considered highly competitive, the report said.

The most liquid parts of the market saw the steepest rise of 30% to 35%, spanning major sectors such as banking, capital goods, consumer non-cyclical, consumer cyclical and technology, as well as large offerings and bonds with five- to ten-year maturities.

Unmet primary market demand is also feeding into secondary trading, ⁠as per the report, with turnover on deals larger than $1 billion rising to 26% in the first 10 days of 2025, up from 15% in 2017, with broader initial ​ownership boosting early activity.

At the very least, it suggests a rethink about the extent of the selloff in many sectors in recent months, and maybe nodded a little to today’s big event - Nvidia’s results.

The world’s most valuable company reports ​after the bell, and for all the ifs and buts about AI, there’s no doubt about the torrent of capex earmarked for chips, computing hardware, bricks-and-mortar data centers and the energy ⁠needed ⁠to drive it.

The chip giant is expected ⁠to forecast a 64% jump in first-quarter revenue ​to about $72 billion dollars. But, as ever, the bar to impress is rising all the time, and Nvidia is facing increasing competition from the likes of Alphabet and AMD.

Chinese ​demand may also be in focus given the recent ebb ⁠and flow of government restrictions on the sale of its top chips there.