High yield bond issuance in the US logged double-digit gains in the first half of 2026, while other global markets saw year-on-year activity dip as geopolitical instability curbed investor appetite.
US high yield issuance reached US$155 billion in the first half of 2026, up 19% compared to the same period last year due to, in large part, a rush of financing deals for AI data centers. Issuance tied to the technology sector in the US stood at US$27.8 billion in Q2 alone, nearly double the previous highest quarterly total (US$15.9 billion in Q2 2025).
The AI boom, however, did not carry over into markets in Europe or APAC (excl. Japan), where year-on-year issuance slowed significantly.
European high yield activity for the first half of 2026 was down 27%, falling to US$59.4 billion. Issuance in APAC (excl. Japan) slid 15% year-on-year to US$7.6 billion.
Red-hot AI market carries US issuance
Surging AI and data center financing provided a timely boost for US high yield markets, as the Iran conflict, among other macroeconomic concerns, caused issuers in other sectors to withdraw from the market and bide their time.
Demand for data center capacity to support the rapid uptake of AI technology has been unaffected by the geopolitical disruption. Commercial real estate services firm JLL estimates that global capacity will have to more than double by 2030 to keep up with expected demand.
Building out the necessary capacity will take an investment of up to US$3 trillion, requiring hyperscalers and data center construction companies to draw on all the financing pools available to them, including the high yield market. To date, data center issuers that have tapped high yield markets for substantial sums include Tract Capital and Fleet Data Centers securing US$4.59 billion, CoreScientific raising US$3.3 billion and Meridian US$5.7 billion, among other issuances.
The steady volume of data center issuance has dominated the market, with technology accounting for US$36.2 billion worth of issuance, almost double the level recorded in the first half of 2025. That figure represents around a quarter of overall US high yield activity in the first six months of 2026. In comparison, the next largest contributor was the energy sector, which generated just over US$18.6 billion of high yield issuance in the first half of 2026, largely unchanged from the US$18.1 billion logged during the same period last year.
The data center issuance boom has also supported a more even balance between refinancing, repricing and recap issuance—which accounted for just over half of activity—and new money deals.
Stable pricing has been another positive feature of the US market. Yields have held steady despite macroeconomic disruption, remaining in line with levels observed since the start of 2024.
Europe rallies after tough Q1
The European market rallied strongly in the second quarter, with quarter-on-quarter issuance almost doubling. But the bounce was not enough to offset a tough Q1 2026, when activity froze as investors stepped away to assess the impact of the Iran conflict.
When the European market reopened in Q2, demand from investors proved robust, with attractive all-in yields relative to cash and investment grade bonds as well as low default rates sustaining appetite, according to BNP Paribas.
Europe also benefits from a supportive refinancing profile. The bulk of maturities have been pushed out to 2029 and beyond, and there is ample capacity in the market to cover near-term maturities in 2026 and 2027.
The rebound in the second quarter, however, was defined by a highly selective approach to underwriting.
Issuers with a rating of at least BB accounted for almost half of issuance through the first six months of 2026, representing the biggest share of the market taken up by higher-rated credits in a decade.
This emphasis on credit quality was also reflected in pricing, underscoring the highly bifurcated nature of the market today. The BB-rated high yield bond index, for example, showed a spread of 211 basis points in the second quarter, while the spread for the CCC index was almost six times wider at 1,260 basis points, according to J.P. Morgan.
Investors are clearly eager to deploy capital, but the credit-quality bar is high.
APAC issuances declined, but long-term outlook is positive
In APAC, high yield activity declined through the first six months of 2026 compared to the same period last year, largely due to the impact and uncertainties arising from the conflict in the Middle East.
Declining investor confidence in Indonesia, Southeast Asia’s largest economy, has added to the headwinds facing the wider region. The economic policies of the new Indonesian administration have unnerved international investors, precipitating currency weakness and credit volatility.
However, when looking beyond near-term domestic and global challenges, the picture for the region improves. Australia in particular has been a bright spot for issuance. In the first half of 2026, US$1.9 billion worth of high yield issuance was recorded in Australia, the highest total across the region, followed by China with US$1.6 billion and India’s US$1.2 billion. Australia’s total for the first half of the year is up 27% compared to the same period in 2025.
More broadly, the APAC market has evolved following the liquidity crisis in China’s real estate sector—which historically accounted for the bulk of issuance—and is more diversified both by industry and region. Infrastructure, industrials and renewable energy issuers now account for a much larger share of the market, helping to mitigate concentration risk, according to MetLife Investment Management and Pinebridge Investments.
Improving corporate financials also bode well for future issuance, once geopolitical uncertainty abates. Default rates are declining and the number of ratings upgrades is outpacing rating downgrades. In addition to improving risk profiles, the APAC high yield market also offers attractive carry (income less funding cost) opportunities, with yield-to-maturity sitting at almost 8%. Issuance figures for the first half of 2026 reflect a difficult point in the cycle for APAC’s high yield market, but there are reasons for optimism for the way ahead.
Strong underlying fundamentals and an emphasis on credit quality are expected to sustain issuance in APAC and EMEA, even if neither market is able to match the AI-driven growth observed in the US. But, to the extent geopolitical tensions moderate, the stage is set for a more synchronized recovery in global high yield issuance.
