Aug. 6 at 8:13 PM
Morgan Stanley expects spreads on AI- and data center-linked asset-backed securities (ABS) to widen after corporate credit spreads in the sector expanded over the past six weeks. The bank said heavy global fixed-income issuance of about
$360 billion year to date has pressured AI and data center credit, with investment-grade data center bonds widening by 40 basis points since mid-June and high-yield issues by roughly 120 basis points.
The ABS market has remained relatively resilient, with July pricing largely stable despite weakness in corporate credit, particularly in senior tranches. Morgan Stanley said this reflects previously priced-in supply expectations, limited secondary-market liquidity, and relatively modest ABS and CMBS issuance compared with the corporate bond market.
The bank believes fully stabilized underlying assets should help limit volatility and continues to favor BBB-rated securities for relative value.
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