Michiel De Bruin

Forces reshaping fixed income AI is usually discussed as a technology or equity market story. For fixed income investors, however, it is increasingly becoming a supply story. Consensus expectations for hyperscaler capital expenditure in 2027 now exceed USD 1 trillion, while expected bond issuance from the largest technology companies has risen sharply as more of that investment is financed through debt. The funding requirement also extends well beyond the hyperscalers.

The geopolitical backdrop remains tense with the impact of Israel’s strike on Iran still unfolding. Yet despite these developments, markets have continued to perform steadily, suggesting a growing resilience to recurring macro and geopolitical noise. In our Q2 outlook (Defend and Spend, published before April 2), we argued that geopolitical uncertainty would adversely impact global growth.

Geopolitical uncertainty has skyrocketed, making US businesses and consumers hesitant to open their wallets. While fiscal support is anticipated later this year, the specifics remain unclear. For now, the economic mood is gloomy. The March FOMC meeting highlighted the negative impact of tariffs on growth and inflation, with the Fed opting to keep rates steady but slashing the 2025 growth forecast and bumping up inflation projections. We note that this puts the Fed in a tight spot.