Flash Fixed Income: AI and the software sell-off

Market focus has shifted in recent weeks from hyperscaler spending to the threat AI could pose to numerous software-as-a-service (SaaS) businesses.

Issuers in corporate credit have started this year on the front foot, capitalising on the current supportive market conditions and front loading their funding plans in anticipation of higher funding needs from the hyperscalers in the US, among other factors.

As Jerome Powell enters his final months at the helm of the Federal Reserve (Fed), market participants have been busy analysing the past speeches of his nominated replacement, Kevin Warsh, with the aim of forming a view as to how his hand is likely to be played.

The month of January has been a very eventful one for markets, mostly courtesy of geopolitical events, ranging from the capture of Venezuela’s sitting president and arguably culminating in Mark Carney’s speech at Davos.

Oracle returned to the bond market yesterday, just five months after its $18 billion September jumbo deal, finally removing the cloud of uncertainty around supply that has hung over the credit.

Foreign exchange markets have taken centre stage again in recent weeks. President Trump’s apparent indifference to the relatively steep dollar depreciation trend of late has raised a few eyebrows and added fuel to the dollar fire.

2026 is already shaping up to be another volatile year for geopolitics, economies and markets. But one pocket stands out as a key beneficiary of the present backdrop.

Recent developments involving Federal Reserve (Fed) Chair Jerome Powell have raised fresh questions around central bank independence, the politicisation of monetary policy, and the future of Fed leadership, particularly with his term as Chair due to expire in May 2026.

One of the many unusual developments in financial markets last year was the decoupling between German Bunds and other safe haven G7 government bonds, most notably US Treasuries. Since the inception of the euro, it’s been quite a rare event that Bunds and Treasuries move in opposite directions for sustained periods of time.