Week Ending: September 11, 2026
Compounding Capex
Quarterly Capital Expenditures (Capex) Forecast Of Hyperscalers* Versus Actual
Sources: Bloomberg, Payden Calculations
*Amazon, Apple, Google, Meta, Microsoft, Oracle; Capex forecast as of the last day of February of each year
Long-term rates rose again this week. One reason is higher oil prices. But another is that U.S. economic growth remains remarkably resilient despite a series of shocks. And we know why: continued AI-related capital expenditures from hyperscalers. Total tech spend is on track to surpass $800 billion in 2026. Will it persist? While investors have expressed skepticism about the sustainability of capex-driven growth, we've heard similar fears for three years running. Instead, capex expectations keep getting revised up, and actual spending keeps outrunning expectations. Oracle's earnings this week reaffirmed a $90 to $95 billion capex plan for fiscal year 2027, up 70% from last year. The motivating factor? The company reported a 121% year-over-year revenue growth in cloud infrastructure. In aggregate, latest estimates suggest that hyperscalers plan to spend 30% more on capex in 2027, more than enough to keep fueling growth. Would a rate hike next week slow the investment boom? Probably not. Lured on by strong revenue growth, the investment cycle could continue even with higher interest rates.
Total Returns By Asset Class
Highlights of the Week:
High Yield: The post-Labor Day supply surge was well absorbed, signaling investor confidence. High-yield spreads have widened by only seven basis points this month, with negative returns driven largely by higher rates rather than credit deterioration. We believe all-in yields in the mid-7% range offer compelling carry for investors who view relatively tight spreads as a reflection of the fundamental backdrop rather than a reason for concern.
Corporates: Investment-grade (IG) new-issue supply kicked off strongly, with $67 billion priced during the shortened week, meeting the upper end of dealer expectations. Year-to-date supply now stands at $1.57 trillion, about 37% higher than at the same time last year. Despite the heavy supply, demand remains robust at these high all-in yields, and IG spreads tightened by two basis points this week to an option-adjusted spread of 78 basis points.
Municipals: Municipal funds recorded $193 million of inflows for the week ending September 9, extending the inflow streak to 21 consecutive weeks, although flows slowed materially to just 21% of the 25-week average. Demand was entirely exchange-traded fund (ETF) driven, with $587 million in ETF inflows offset by $394 million in open-end fund outflows. Despite the softer recent pace, year-to-date inflows of $69.9 billion remain the second-highest on record, trailing only 2021 and slightly ahead of 2019.
Equities: The U.S. equity market fell this week amid renewed inflation concerns, rising Treasury yields, and heightened geopolitical uncertainty. Sector performance was broadly negative, with health care, materials, and consumer discretionary the worst performers, while energy, communications, and technology led.
Securitized Products: Demand for mortgage credit remains robust despite heavy new issuance volumes. Non-qualified mortgages and closed-end second-lien mortgage programs have already surpassed their full-year 2025 issuance levels, with over a quarter of 2026 left. Meanwhile, credit curves remain flat, with spreads approaching record-tight levels for lower-rated tranches.
Disclosure: This material reflects the firm’s current opinion and is subject to change without notice. Sources for the material contained herein are deemed reliable but cannot be guaranteed.
