VC VCSH Vanguard Short-Term Corporate Bond ETF Loading... : Investor Sentiment and Bull/Bear Views

Bhatia's team has been very defensive on AI-sector credit since the start of the year and has not added much, even at wider spreads. Hyperscaler IG issuance is about $450-500 billion this year, roughly what the Treasury issues in 20- and 30-year debt. Oracle spreads are about 200bp wider on the year and this debt keeps underperforming. The issuers have gone from free-cash-flow positive to negative, and it is unclear who captures the profits: hyperscalers, model companies or neoclouds. Bondholders also do not share in the upside the way equity holders do. Instead of Oracle-type paper at 7-8%, his portfolios are choosing short-maturity, high-quality investment-grade debt at about 6%.

For money sent abroad, he recommends not putting everything into equities at record highs; high-quality established companies offer dollar debt at 5% to 7% in 3-6 year maturities, allowing investors to avoid long-duration risk.

The duration trade has been difficult, so she recommends focusing on income and spread opportunities rather than reaching for Treasury duration. Investors should move into short-duration corporate credit, including investment-grade BBB and the higher-yielding BB/B segments, where yields are historically attractive and corporate fundamentals look strong; she cites BondBloxx's triple-B product as a precise way to implement the BBB idea and says to keep duration as short as possible.