US corporate bonds see strong foreign demand led by tech shift

Foreign demand for US investment-grade corporate bonds has remained strong for 15 consecutive months, according to a note by Citigroup, as cited in a Reuters reports.

Overseas investors are increasingly rotating into technology, media and telecom (TMT) debt while reducing exposure to financial bonds.

This trend comes despite recent concerns over rising corporate debt levels, particularly at companies such as Oracle, which has faced investor scrutiny regarding its funding plans for large-scale artificial intelligence infrastructure expansion.

Shift towards TMT and longer maturities

Citigroup highlighted a clear shift in investor allocation preferences.

"Foreign investors have rotated toward TMT and away from financials, and added more in the ⁠15y+ maturity bucket, in line with recent trends in the primary market," the brokerage said in a note dated, as mentioned in a Reuters report.

The data reflects a notable increase in foreign participation in TMT bonds.

According to Citigroup, overseas investors raised their share of purchases in TMT corporates to 26.1% in 2026, up from 17.1% in 2025.

At the same time, their exposure to financial debt dropped sharply to 39% from 53.8%.

Demand for longer-duration bonds has also surged.

Citigroup noted that bonds with maturities exceeding 15 years accounted for 44.1% of total purchases in 2026, compared with 23.7% in 2025.

Strong inflows from global markets

The brokerage pointed to strong inflows into US corporate debt from several regions.

The largest inflows since February 2025 came from Canada, Japan, Norway, Taiwan, Kuwait and Hong Kong.

Hong Kong stood out in particular, with holdings rising 19.4% following regulatory changes.

This suggests that policy adjustments in key financial hubs are supporting continued demand for US credit markets.

AI-driven credit strength supports issuers

Citigroup also highlighted improving credit profiles among select US corporates, driven by the ongoing buildout of AI infrastructure.

Companies such as American Tower, Analog Devices, Keysight Technologies and Cadence Design Systems have seen positive rating actions.

These upgrades reflect stronger balance sheets and growth prospects tied to increased investment in AI-related infrastructure, reinforcing investor confidence in the sector.

Structural demand supports US bond dominance

Citigroup emphasised that structural factors continue to underpin global demand for US corporate bonds.

"Global investors seeking long-duration credit exposure have no viable alternatives at scale, reinforcing the structural barriers to a widespread rotation away ⁠from US assets," the brokerage said, as reported by Reuters.

According to the firm, US companies account for the majority of the $11.6 trillion in top-rated corporate bonds across the US and Europe.

They also dominate issuance in bonds with maturities exceeding 15 years.

This strong supply position, combined with consistent global demand, highlights the continued appeal of US corporate debt among pension funds and insurance investors seeking long-term, high-quality assets.