RBC asset management fixed income executives: Hedge funds “capitulated” to sell AI debt, and interest spreads on technology bonds widened significantly

The Zhitong Finance App learned that Andrzej Skiba, head of US fixed income at BlueBay Asset Management Company, a subsidiary of the Royal Bank of Canada (RBC), said on Thursday that in the past few weeks, hedge funds have been selling off large amounts of debt related to AI construction. “We have seen massive hedge fund divestments in this area,” said Skiba. We saw positions being liquidated and there was a massive sell-off in the market.”

A data center loan portfolio worth approximately $500 million has been listed for sale. This auction is rare. It happened a few days after the Democratic Party swept through the US midterm elections, leaving many projects in doubt about their future. According to people familiar with the matter, the loan to be sold includes a $25 million loan to support a large-scale data center project in New Mexico, which is part of the Stargate project jointly developed by OpenAI, SoftBank Group, and Oracle (ORCL.US).

Skiba said hedge funds are also selling off debts from media and telecom sector companies. He added that leveraged funds drove these deals. Also, hedge funds have been selling off tech stocks. Hedge funds left the sector the fastest in at least a decade last month, according to data from Goldman Sachs's main brokerage business unit.

Skiba has previously stated that AI is a “disaster” for fixed income investors. However, as interest spreads in the industry widened significantly, he is now more willing to hold this type of debt.

According to the data, the average cost of bond financing for investment-grade tech borrowers compared to the rest of the US market has risen to the highest level since 2003. AI companies are active in issuing bonds this week, and are expected to issue a large number of bonds to fund trillions of dollars in construction plans.