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Foreign investors have continued to show strong interest in US investment-grade corporate bonds, maintaining steady inflows for over a year, according to a recent note by Citigroup. The trend reflects a clear shift toward technology, media and telecom (TMT) companies and longer-duration bonds, while exposure to financial sector debt has reduced. Investors from regions such as Canada, Japan and Hong Kong have led inflows, supported by regulatory changes and demand for stable, long-term returns. Despite concerns around rising corporate debt, particularly linked to AI expansion, US issuers continue to dominate global high-grade bond markets.
Foreign demand for US investment-grade corporate bonds has remained steady for the past 15 months, with global investors increasingly allocating funds toward technology, media and telecom (TMT) companies, according to a recent note by Citigroup. At the same time, investors have been gradually reducing their exposure to financial sector bonds and shifting toward longer maturity instruments. Advertisement
The brokerage noted that this trend continues to gain strength in line with primary market activity, where investors are showing a clear preference for bonds with maturities exceeding 15 years. It explained that foreign investors have been rotating toward TMT debt while moving away from financials, alongside increasing allocations in the long-duration segment.
This shift comes despite recent concerns around rising debt levels at companies such as Oracle, where investors had raised questions regarding funding plans for large-scale artificial intelligence infrastructure expansion. However, demand has remained largely unaffected.
Data shared in the report shows that foreign investors increased their share of TMT bond purchases to 26.1% in 2026, up from 17.1% in the previous year. In contrast, exposure to financial sector debt declined significantly to 39%, compared to 53.8% earlier.
The report also highlighted that US corporate bonds recorded their strongest inflows since early last year, with key contributions coming from investors based in Canada, Japan, Norway, Taiwan, Kuwait and Hong Kong. Holdings from Hong Kong saw a notable rise of 19.4%, supported by recent regulatory changes that facilitated increased investment.
In addition, demand for bonds with maturities of more than 15 years rose sharply, accounting for 44.1% of total purchases this year, compared to 23.7% in the previous year. This indicates a growing preference among global investors for long-term, stable returns.
Citigroup also pointed to positive rating actions for companies such as American Tower, Analog Devices, Keysight Technologies and Cadence Design Systems. These upgrades were linked to improved credit profiles, largely driven by ongoing investments in AI infrastructure.
The brokerage further indicated that global investors looking for long-duration credit exposure currently have limited alternatives at scale, which continues to support sustained interest in US assets. It added that structural factors are likely to prevent any significant shift away from US corporate bonds in the near term.
US companies continue to hold a dominant position in the global bond market, accounting for a major share of the USD 11.6 trillion in top-rated corporate bonds across the US and Europe. They also issue most of the bonds with maturities beyond 15 years, making them a preferred choice for global pension funds and insurance investors seeking long-term stability.
Source Reuters
5th Jun, 2025
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