Global issuance of zero-interest convertible bonds is on track for a record year, with $72bn issued so far in 2024 according to Dealogic, nearing the $73bn full-year 2025 record. AI companies dominate issuance as investors accept zero coupons for exposure to the volatile sector. These bonds contain call options that gain value with stock volatility, allowing investors to exchange debt for shares at a set price. "The companies coming to this market now are far more volatile than the ones they replaced," said Nicolas Crémieux, head of convertible bonds at Mirabaud Asset Management.

Strategy, known for bitcoin holdings, pioneered this debt structure. AI-linked issuers this year include ON Semiconductor ($1.3bn in May) and Ciena Corp ($2.9bn in June). Rising borrowing costs, with 10-year US Treasuries climbing from 4.15% to 4.66%, have driven issuers to minimize financing costs.

Zero-coupon bonds now account for 41% of all convertible issuance. Despite strong demand, higher yields have pushed issuers to reduce conversion premiums to protect shareholders, often through capped call options from banks.