U.S. debt is competing with a record supply of corporate bonds, pushing up the cost of federal borrowing just as war spending piles up

The AI capital expenditure boom has created a gusher of corporate debt, forcing the Treasury Department to make its bonds more attractive to investors as the U.S. war on Iran adds to the deficit.

Last Tuesday saw the single busiest day on record for U.S. corporate bond sales as President Donald Trump’s hint that the war may end soon briefly calmed markets and sparked a mad dash for companies to issue fresh debt.

By the end of the day, total investment-grade issuance topped $65 billion, exceeding the prior one-day record of $52 billion in 2013. The flood of debt was led by e-commerce giant and AI hyperscaler Amazon, which raised $37 billion, sources told the Financial Times.

That beat the company’s guidance for $25 billion-$30 billion as investor demand far outpaced the available supply, attracting about $123 billion in orders.

The corporate debt surge was enough to move the needle in the Treasury market, where daily trading volume exceeds $1 trillion. Analysts at Deutsche Bank said in a note last week that the bond sales added some upward pressure on the 10-year yield, which climbed 6 basis points to 4.16% at session highs.

Apollo Chief Economist Torsten Slok previously warned the flood of corporate debt could make borrowing more expensive for the federal government. In a note from January, he pointed out that Wall Street estimates for the volume of investment grade debt that’s on the way in 2026 reach as high as $2.25 trillion.

That’s as the AI boom increasingly sends companies, including hyperscalers and adjacent firms, to the bond market to fund massive investments in data centers and other infrastructure.

“The significant increase in hyperscaler issuance raises questions about who will be the marginal buyer of IG paper,” Slok said. “Will it come from Treasury purchases and hence put upward pressure on the level of rates? Or might it come from mortgage purchases, putting upward pressure on mortgage spreads?”

Much has changed since January. The Iran war is shaping up to be a prolonged conflict that’s sent oil prices spiking. In turn, bond yields are up on exceptions of higher inflation—further adding to borrowing costs.

Bombarding Iran everyday also adds stress to the deficit, which hit $1 trillion in just the first five months of the fiscal year. Pentagon officials told lawmakers last week that the cost for the first six days of the war topped $11.3 billion, according to the New York Times.

Meanwhile, Trump has vowed to boost defense spending to $1.5 trillion a year from $1 trillion, threatening to further blow up the deficit.

The unsustainable trajectory of U.S. debt has raised growing alarms on Wall Street. But for now, investors appear to have a strong appetite for both corporate and government debt.

Days after Amazon’s mega-offering, an auction Thursday for $22 billion in 30-year Treasury bonds drew solid demand, though it was helped by the jump in yields since the war began.

And a Treasury offering last month saw the highest demand ever in the history of 30-year auctions, led by overseas buyers.

“The bottom line is that Treasury auction metrics show that there continues to be very solid demand for the long end in US Treasuries,” Slok said in a note Feb. 20.

Jason Ma is the weekend editor at Fortune, where he covers markets, the economy, finance, and housing.

World’s Most Admired Companies

Frequently Asked Questions

Customer Service Portal

Single Issues For Purchase

Diversity And Inclusion

Diversity And Inclusion

© 2026 Fortune Media IP Limited. All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice | Do Not Sell/Share My Personal Information FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. FORTUNE may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.

© Fortune