The Credit Edge by Bloomberg Intelligence Newfleet Warns of ‘No Free Lunch’ in AI Debt Funding Frenzy
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Dec 18, 2025 Dave Albrecht, President and CIO of Newfleet Asset Management, dives into the risks of the AI debt frenzy. He warns that heavy borrowing by investment-grade firms for AI projects could lead to significant fallout. Albrecht highlights the precarious position of Oracle's debt while advocating for asset-backed securities as a hedge. The discussion covers tactical moves across fixed income, the implications of private credit's growth, and the importance of direct company evaluations. He stresses the need for diversification amid evolving market dynamics.
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Low Defaults But Tight Spreads
- Defaults are unusually low across markets due to abundant liquidity and pushed-out maturities.
- Credit spreads are tight, so upside from spread compression is limited and selection matters.
Be Tactical And Quick On Dislocations
- Stay tactical and act quickly on short-lived dislocations using derivatives and cash execution.
- Use multi-sector levers to rotate into cheap pockets when anomalies appear.
Private Credit Has Pushed Out Defaults
- Private credit and lower retail participation have extended the default cycle and provided liquidity.
- But concentration in services and software and weak covenanting raise risks if downturns arrive.