Rathbones’ Jones: We’ve seen this story before in the dot.com bubble

Web Desk March 10, 2026

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Rathbones’ Jones: We’ve seen this story before in the dot.com bubble

Artificial Intelligence (AI) hyperscalers made their mark on the fixed income market last year, as they began issuing debt to fund their technology spending.

According to data from M&G Investments, five of the major AI hyperscalers – Amazon, Alphabet, Meta, Microsoft and Oracle – issued $121bn worth of corporate bonds last year, compared to a yearly average of $28bn per year between 2020 and 2024.

This could have even further to run, with data from Rathbones Asset Management estimating that hyperscalers could issue another $93bn in corporate bonds this year.

For Bryn Jones, head of fixed income at Rathbones, this is creating risks similar to the dot.com bubble.

Jones said: “This story has already played out before with TMT companies.”

During the bubble, technology companies issued high amounts of debt, which led to wider spreads for these companies, Jones added. Indeed, according to data from Bloomberg, spreads on TMT companies widened by about 41 basis points between end of 1998 and December 2001.

As they took on more debt, they became much bigger in the index, and investors struggled to navigate the volatility, according to the manager.

The same thing is happening to modern technology companies, according to Jones. AI hyperscalers started on very tight spreads, but as issuance has come through, they have become more leveraged and less appealing from a bond market perspective, he explained.

This has already had a measurable impact on companies such as Oracle, he noted. Indeed, since its jumbo bond issuance in September, its stock price has dropped 34.3%, and credit default swaps (the cost of insurance against defaults on its bonds) widened.

This poses a challenge to investors because as these companies issue more debt, they will become larger parts of the index, Jones explained, as bond indexes are weighted in favour of the most indebted companies, rather than the most high-quality ones.

This poses a risk because the big tech companies have huge costs and debt, but not enough cash to justify them.

“I’m a bond manager; I don’t care about growth. I want to see that these companies are growing their cash, but at the moment, I don’t think they are,” Jones said.

“I don’t want to be invested in something like that if I think spreads will widen further from here.”

While he conceded it was unlikely that any of these AI companies would go bust, given their strong balance sheets, the opportunities in other parts of the market just looked more compelling, he said.

Preparing for a ‘bend in the road’

Instead, Jones has been looking for “ports in the storm” and opportunities to be “fearful when others are greedy” by derisking the portfolio in preparation for further volatility.

He said managing the portfolio in this way was the same as being a “car driving towards a bend in the road”.

Being risk-on had worked, like driving a car down a completely straight road in recent years, he said. But in 2026, the outlook is far riskier, which demands a more cautious approach, according to the veteran manager.

“I’ve got no idea what’s coming at that bend in the road, and I’ve got no idea of how to treat it,” Jones said. “But the experience and knowledge I have tells me that as we get towards that point, I need to derisk the portfolio.”

Jones has done this by reducing the duration to neutral. He’s paired long-duration, low-risk assets with higher-beta, short-duration bonds, which gives the team the flexibility to respond to volatility.

This should create a system where the portfolio can achieve some good, sharp ratios, but also “won’t hurt us all that much if we’re wrong”.

For example, he liked the long end of the gilt curve this year. Following the announcement that the debt management office would reduce long-duration gilt issuance to 9.5% from an average of 20% creates a compelling supply-demand dynamic for the team.

If quantitative tightening eases off throughout the year, there will be an almost total lack of supply in the gilt market, then long-end gilts start looking very appealing, he said.

Another new addition was the purchase of asset-backed securities (public bonds backed by income-generating assets, such as mortgages), to add resilience.

“We’re parking our money in stuff that gives a pretty good yield, not much volatility, but that we can exit or reinvest in when spreads widen, or yields start to rise.”

This more cautious approach seems to be paying off for Jones in recent years. Over the past one and three years, his Rathbone Ethical Income fund was up 6.7% and 21.8%, a first quartile return in the IA Sterling Corporate Bond sector.

Meanwhile, the Rathbone Strategic Bond fund is up 6.5% and 20.9%, second quartile in the IA Sterling Strategic Bond sector, according to FE fundinfo.