Alphabet Inc. (GOOGL) is selling bonds by the boatload. Big Tech is spending hundreds of billions on AI-related capex. Worries about a SaaS-Pocalypse are growing. And behind the scenes, THIS credit risk indicator is perking up. Could it be a key “tell” for tech stocks in 2026?
Check out my MoneyShow Table of the Day — the ICE BofA Single-B US High Yield Index Option Adjusted Spread. Yes, it’s a mouthful. But let’s keep things simple. This shows the extra yield a moderately risky corporate borrower has to offer – above and beyond what the US government pays – when issuing debt today.
Single B High Yield Index Spread
Source: FRED
You can see that it costs a Single-B borrower about 310 basis points – or 3.1 percentage points – extra to access funding than Uncle Sam. That’s up from around 275 bps in September (though well below the “Liberation Day” peak in early 2025.)
What’s going on? As a Reuters story noted yesterday, “Concerns that artificial intelligence could disrupt large parts of the software industry have started to spill into credit markets, Morgan Stanley warned, as software accounts for about 16%, or $235 billion, of the $1.5 trillion US loan market.”
The piece goes on to note half the loans made to software companies feature B- or lower ratings. Another 26% are CCC-rated – near the bottom of the credit quality scale. Plus, many software loans mature in four years or less. If borrowers need to refinance to extend their payback periods – at a time when credit markets are increasingly antsy – it could drive borrowing costs and defaults higher.
Right now, the spread widening is modest. But I’m keeping a close eye on the high yield markets to see if it gets worse. If it does, it’ll be another obstacle for AI stocks and big tech names…or even the market as a whole if spreads really start blowing out.
