Tasos Vossos

In the market for junior bank capital — where distinctions between strong and weak banks matter most — investors are becoming remarkably indifferent.

Bond investors are increasingly betting on flexible funds that can buy whatever they like as lofty credit market valuations leave little margin for error.

Unconstrained funds have enjoyed a revival after taking a beating during the inflation shock of 2022. In the US, nontraditional bond funds have grown about 6% in size this year, and 18% since the end of 2024, according to Morningstar data. In Europe, assets in global flexible bond funds have grown almost 10% this year.

The bonds sold by hyperscalers to fuel their artificial intelligence ambitions have become a drag on investor portfolios from London to Tokyo.

As firms such as Meta Platforms Inc., Alphabet Inc., and Amazon.com Inc. ramp up borrowing to fund data centers and other AI infrastructure, they have tapped pools of capital worldwide. The wave of issuance has become a test of credit market depth, while growing unease over the scale of AI spending is hammering the shares of chipmakers and cloud-computing giants.

Goldman Sachs Group Inc. is looking to sell new preferred shares just days after a metric determining risk and value in these securities hit its lowest level since the global financial crisis.

A 100-year bond that Alphabet Inc. issued earlier this year in the sterling market as it gorged on debt around the world has dropped below 90 pence on the pound for the first time.

US banks are raising regulatory capital at the tightest valuations since the financial crisis, unsettling the most seasoned investors.

Investors are “far too complacent” on the Additional Tier 1 bonds, the riskiest type of bank debt, and spreads now appear too tight, according to investors at Man Group.

Oracle Corp. and Stellantis NV are among a group of high-grade companies with debt that has recently traded close to junk levels, putting the bond market on watch for a new era of fallen angels.