Rates may have peaked. AI's credit boom is just getting started.

Fed hikes may be overpriced, but yields stay supported by AI-driven growth. IG carry remains strong as record supply tests spreads.

The Treasury curve is expected to steepen in the second half of 2026: front-end yields may ease as oil-driven inflation pressure subsides and markets have potentially priced in too many Fed hikes under Chair Warsh's data-dependent regime, while robust AI-related investment and productivity-driven growth should keep yields stable to slightly higher at the 10-year and beyond.Investment grade credit spreads remain tight — index OAS at 74 basis points with a yield-to-worst of 5.22% — yet strong company fundamentals and yield-based demand have absorbed the heaviest supply environment in years, with US IG gross issuance already crossing $1.26 trillion year-to-date, matching the record pace set in 2020, and July alone forecasted to bring approximately $130 billion in new supply — the busiest July in a decade.Technology and data center bonds have become the defining theme in IG credit for 2026: hyperscalers are expected to borrow as much as $190 billion in the bond market this year alone, and while the team sees this pace continuing, they are building exposure selectively — targeting wider spread entry points among the highest-quality issuers while remaining overweight banks, defensive sectors, corporate hybrids, and insurance, and largely avoiding deep cyclicals and BDC bonds.