As part of our market update series, below are our key takeaways from the convertible market in the second quarter of 2026.
- Q2 2026 issuance totaled ~$61 billion across 49 offerings, nearly double Q1 2026 volume of ~$31 billion, making Q2 2026 the most active quarter on record for U.S. convertible and mandatory convertible issuance. The quarter was supported by multiple billion-dollar transactions, including Alphabet’s $19.25 billion mandatory convertible offering, which accounted for approximately one-third of total volume and highlighted the growing use of the convertible market to efficiently raise junior capital at scale.
- AI-related financing was a key theme, with issuance tied to infrastructure, data centers, semiconductors, and technology platform investment. Technology and communication services represented approximately 68% of total Q2 volume, supported by large transactions from issuers with significant scale, liquidity, and strategic capital needs.
- After a strong rebound in the last quarter, new issuance activity in the healthcare sector remained active: 13 issuers raised $5.7 billion across 13 transactions. Revolution Medicines was a notable highlight, with its upsized $2.0 billion common equity and convertible offering, marking the largest ever biotech dual tranche financing.
- Liability management remained a consistent theme in the new issuance market, while pricing outcomes stayed highly issuer-friendly: 69% of Q2 deals priced better than the midpoint of the marketing range.
New Issuance: Q2 2026 saw 49 new issue convertible and mandatory convertible offerings for total volume of approximately $61 billion. The quarter represented a significant acceleration from the $31 billion raised in Q1 2026 and was the strongest quarterly issuance period in the timeframe shown. Issuance was particularly active in May and June, with 21 deals and 20 deals, respectively, following 8 deals in April. Mandatory convertible issuance was a significant development during the quarter, with aggregate mandatory volume increasing from $9.5 billion in Q1 to $23.0 billion in Q2. Alphabet’s $19.25 billion transaction accounted for the majority of Q2 mandatory volume and highlighted the market’s role as an efficient source of junior capital for large-cap issuers, beyond traditional convertible debt financing.
More broadly, mega-deal activity was a defining feature of the quarter, with several issuers accessing the market at multi-billion-dollar scale. These transactions highlighted the depth of investor demand for large offerings, particularly where issuers had scale, liquidity, volatility, or clear strategic financing needs.
The sector mix also reflected several important market themes. Technology accounted for 36% of Q2 issuance, while communication services represented 32%. Together, these two sectors accounted for approximately two-thirds of quarterly volume. AI-related issuance was a key theme, with proceeds tied to areas such as infrastructure, compute capacity, server components, data centers, semiconductors, and broader technology platform investment.
Healthcare also remained a meaningful area of activity. The sector represented 9% of Q2 issuance and continued to price with attractive terms. Several healthcare issuers achieved low- or zero-coupon structures and strong conversion premiums, reflecting continued investor demand for healthcare and biotech exposure.
Refinancing and liability management remained recurring use cases. Many issuers used the convertible market to repurchase existing converts, repay senior notes or credit facilities, refinance debt, or extend maturities. Dilution mitigation was also prominent, with capped calls and bond hedge / warrant structures frequently used alongside new issuance.
Terms: Investor sentiment in Q2 2026 remained highly constructive. Average coupons declined to 1.85%, compared to 2.72% in Q1 2026, while average conversion premiums increased to 35%, compared to 32% in Q1. Technology sector terms were strong, with an average coupon of 1.79% and an average conversion premium of 38%. Healthcare sector terms remained similarly attractive, with an average coupon of 0.87% and an average conversion premium of 38%.
Notably, these issuer-friendly terms were achieved despite a higher average 5-year U.S. Treasury yield of 4.09% in Q2, compared to 3.77% in Q1. The combination of lower coupons and higher conversion premiums notwithstanding a higher Treasury backdrop points to a favorable issuance environment for convertible borrowers.
Average Convertible Debt New Issue Coupon Rate and Conversion Premium 2023 – 2026
| Sector | 2023 | 2024 | 2025 | Q1 2026 | Q2 2026 |
|---|---|---|---|---|---|
|
All Deals |
3.50% / 30% |
2.62% / 31% |
1.92% / 33% |
2.72% / 32% |
1.85% / 35% |
|
Technology Sector |
2.80% / 27% |
1.86% / 34% |
1.19% / 32% |
2.68% / 30% |
1.79% / 38% |
|
Healthcare Sector |
2.56% / 30% |
2.69% / 31% |
1.52% / 34% |
0.83% / 38% |
0.87% / 38% |
|
Average 5y UST |
4.06% |
4.13% |
3.92% |
3.77% |
4.09% |
Pricing Results: Theoretical Value: The graph below illustrates the theoretical values of the deals that priced over the last 12 months. A value of 100 represents a deal priced at fair value, with no “cheapness,” while anything above 100 represents a theoretical new issue concession.
Average theoretical values tightened throughout Q2, declining from 100.8 in April to 100.6 in May and 100.5 in June. These levels were below the trailing 12-month average of 101.4, indicating that new issue concessions remained limited even as quarterly issuance volume accelerated significantly. Theoretical values near fair value suggest that issuers continued to achieve attractive pricing outcomes despite the heavy new issue calendar.
Pricing Results vs. Price Talk: Pricing outcomes in Q2 continued to favor issuers. For the quarter overall, 24% of deals priced better than range and 45% priced in issuer-friendly territory, meaning 69% of Q2 transactions priced better than the midpoint of the marketing range. An additional 20% priced at the midpoint, while only 10% priced in investor-friendly territory. No Q2 transactions priced worse than the initial range.
These outcomes represented an improvement from Q1 2026, when 61% of deals priced better than midpoint and approximately 24% priced worse than midpoint. The Q2 results are consistent with a constructive execution backdrop and resilient investor demand, particularly given the significant increase in issuance volume during the quarter.
At the same time, execution remained selective rather than indiscriminate. Larger, higher-quality, and volatility-rich issuers generally achieved the strongest outcomes, while more credit-sensitive issuers saw weaker equity reactions and more investor-friendly terms. This reinforced that investors remained focused on credit quality, sector risk, equity story, and use of proceeds.
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