Australian bonds may benefit as US dollar alternative

Binaya Dahal

Editorial Intern, Financial Newswire

18 February 2026

Australia’s bond market could gain a large share of AI-driven debt issuance as hyperscalers seek to spend around an estimated $US660 billion this year and diversify funding away from crowded US dollar markets, Head of Fixed Income at Betashares, Chamath De Silva says.

De Silva said global investors would be paying much closer attention to the Australian bond market as strong fiscal position, solid rating, and greater policy stability than many major economies have made it the “cleanest dirty shirt” in global fixed income.

“The credit market has matured materially, the investor and issuer base is broadening, and Australia’s fiscal position stands out at a time when concerns around debt sustainability are rising globally,” he said.

“Compared to the US, UK and Japan, our public balance sheet remains in far better shape, we retain a AAA credit rating, and there are fewer concerns around fiscal policy or central bank independence.

“These factors are supportive for global demand, especially against a backdrop of investors looking to diversify away from US dollar assets more generally, and US Treasuries more specifically.”

He further stated that the combination of a hiking cycle already priced in, a compelling term premium and structural advantages should make Australian government bonds attractive to global capital seeking high-quality sovereign exposure.

Moreover, De Silva said a surge in corporate bond issuance from US technology and data-centre operators funding AI infrastructure was lifting the weight of technology and communications in global investment-grade benchmarks.

Australia, however, remains structurally underrepresented in those sectors with technology accounting for just 0.15% of the AusBond Credit Index and historically limited local issuance from global technology names.

As global investors look to diversify funding sources and reduce concentration in US-dollar credit, De Silva said he expect more Australian dollar-denominated issuance from highly rated global technology and communications companies.

“In 2026, with unprecedented levels of US capex, Australian corporate bonds are likely to benefit, owing to strong domestic credit fundamentals, an underweight to the technology sector, and attractive outright yields,” he said.

De Silva added the trend was expected to become evident in the second half of the year, though recent announcements from US hyperscalers suggested technology could represent a much greater share of the AusBond Credit Index sooner.