Key points
- BBB bonds still sit below March's peak
- Microsoft's $25 billion bond sale adds to the supply
- Oracle's CDS protection gets cheaper in October
The extra yield investors demand to hold highly rated US corporate bonds reached a 2026 high this month. But the lowest-rated investment-grade bonds are still below their March peak.
The ICE BofA index of AA-rated corporate bonds reached 67 basis points over Treasuries on Oct. 23 and ended Oct. 29 at 65, up from 49 at the start of the year. A basis point is one-hundredth of a percentage point. That makes 65 basis points a relatively small spread, but it's 33% wider than it was at the start of 2026.
The AAA index rose from 34 to 46 basis points over the same stretch, matching its July high. The BBB index, which tracks the lowest rung of investment grade, ended Oct. 29 at 110 basis points, up nine this year but below the 116 it reached on March 16. The overall investment-grade index stood at 89, against 94 at its March peak.
In March, the riskier bonds moved more. On March 30, the BBB spread was 58 basis points wider than the AA spread; by Oct. 29, that gap was 45. This time, the highly rated bonds have done more of the moving.
My best guess is that investors want more yield as a large volume of high-grade bonds comes to market. Microsoft is still rated AAA, but even the safest borrowers' bonds trade at wider spreads than they did at the start of the year.
The AA index includes plenty of companies with nothing to do with data centers, so it can't prove that AI borrowing is driving the change.
Microsoft's $25 billion sale landed in a quiet month
Our AI debt tracker counts $701 billion of AI-related financings that have priced or closed, and $362 billion of that is bond sales by Big Tech companies. October was quiet for most of the month. We wrote on Oct. 27 that Meta and Anthropic were turning to stock sales as AI debt slowed.
Then Microsoft (MSFT) priced $25 billion of bonds on Oct. 29 in 10 pieces. The fixed-rate notes paid 25 to 105 basis points over Treasuries, depending on the maturity. It was Microsoft's first US bond sale since 2017, and the company had $64.5 billion of cash and short-term investments at the end of September. It borrowed anyway. That deal took October's total of priced, closed, or signed deals on our tracker to $30.8 billion through Oct. 29.
Oracle's credit default swaps moved the other way
The hedging side of the market looks different. Oracle (ORCL) is rated BBB- by S&P, the lowest investment-grade rating. Its five-year credit default swaps, which sell protection against specified credit events, traded at 277 basis points on Oct. 28, down from about 320 earlier in the month. They're still up almost 100% this year. We covered the $20 billion cap on new fundraising that Oracle announced at its Investor Day the same day.
Oracle's bonds followed a similar path in our daily data. The median spread across the 38 Oracle bonds we track was 306 basis points on Oct. 23 and 272 on Oct. 29.
There's also a gap between Oracle's bonds and its credit default swaps. On Oct. 28, the four Oracle bonds we track that mature closest to five years out, in 2031 and 2032, paid 219 to 242 basis points over Treasuries. Five-year protection cost 277. It isn't a perfect comparison, since a swap premium and a bond's spread over Treasuries aren't calculated the same way, and our bond prices come from a pricing service. But protection on Oracle cost more than its bonds paid.
Oracle's swaps and bonds both eased late in the month, while broad AA and AAA spreads remained near their highs. A 65-basis-point spread isn't a crisis, but the cheapest money in corporate America is getting a little less cheap. I'd expect Meta, Alphabet, and Amazon to pay wider spreads than they did earlier this year the next time they sell bonds, and their next big deal is the one I'm watching.
