From the Desk

Governments the world over are running persistent deficits and need to borrow more to finance their budgets. And the bill for enhanced infrastructure keeps growing as climate effects and geopolitical disruptions force more spending on energy alternatives, defense and supply chain resilience. Global bond investors are seeing all this and are demanding more to hold the debt. Yields on long-term developed economy government debt are near decade highs, and in Japan’s case are at all-time highs.

While inflation threats are adding to the angst, the biggest worry is still the apparent lack of political urgency to bring deficits under control. As bond markets show their discomfort, policymakers are starting to react. This week in the U.S., as 10- and 30-year rates rose, Treasury Secretary Scott Bessent announced his department would start buying back more government debt. That drove rates down slightly, but the dollar weakened. This implied that, while the market saw this intervention as helping reduce immediate supply, it did little to change the overall debt trajectory.

Bond markets are slowly repricing growing fiscal risks. We are still at the early stages of that signaling, but without more fiscal attention, those subtle signals could become a roar.

Sources: Bloomberg, The Financial Times, 2026.

For most broadly syndicated private placements, spreads have tightened since the start of 2025, leading to a growing number of U.S.-dollar deals with just double-digit spreads, according to data from Private Placement Monitor. The sub-100 basis-point (bp) issuances come predominantly from higher-quality (designated “NAIC 1” by the National Association of Insurance Commissioners) utilities and some industrials. The increase in such private placement deals, along with broad shifts in tenor, merit a closer examination of the market.

Looking back to 2023, there were three deals, totaling $390 million, that priced in the +85–95-bp range, but were for shorter tenors (3–5-year weighted average life [WAL]). In 2024, there were five deals, totaling about $747 million, that priced in the +80–95-bp range, and similarly were for 3–5-year WAL. By 2025, that increased to 21 deals, totaling over $3.3 billion, that priced in the +70–95-bp range. Even more notably, the WAL range widened to 3–30 years. This phenomenon has continued into the first half of 2026, with 13 deals, totaling over $2 billion, pricing in the +75–95-bp range, with WAL ranging from 2–21 years. Interestingly, even with longer-tenor deals in 2025 and first half of 2026, the weighted average coupon has actually declined for sub-100-bp issuances.

The primary driver is tight public bond spreads. Most of the previously mentioned longer-tenor deals are broadly syndicated and in less complex transactions. A potential factor is that higher base rates have made issuers more reluctant to issue longer-dated debt to keep all-in coupons lower. Investors who desire longer duration are in a more competitive market and are relaxing spread demands, resulting in them completing private placement deals with little to no relative value compared to publics. As a reference, in the first half of 2026, there was $800 million of NAIC 1 utilities, all first mortgage bonds (FMB), that issued for 10 years or longer at just +90–95 bps. Over the same time period, the 10-year publics A+/A/A-rated utilities index was averaging around +88 bps.

The current issuer-friendly market environment requires investors to remain strategic and disciplined with managing asset allocation, focusing on finding the best relative value opportunities rather than simply chasing deal opportunities. When relative value for private placement in certain sectors, say utilities, is weak in comparison to publics, investors may need to evaluate if they are better off allocating to public bonds in those sectors, while diligently considering private placement opportunities representing other higher relative value sectors or niche investments.