AI debt and French bonds face a stress test — why it may not be over cnb.cx/47Ccg1V
Tik tok, tik toc.....Downgrades on the way! Credit Rating Securities
From the FT:
"Investors are racing to buy credit default swaps to protect their portfolios in the event the AI boom unravels....
In a sign of investors’ increasing unease over the borrowing binge, the cost of buying CDS on many AI-linked companies has hit record highs this month."
#economy #markets #tech #bonds @ft
Peter Schiff & Grant Cardone SLAM Each Other Over the Next Housing Crash! youtu.be/Ob42780PvqA?si=eSrt… via @YouTube
BIG OUCH!!! Time to lock in some bond protection. DelphX all the way
🦔CoreWeave stock fell about 13% Wednesday after its bonds due in 2032 traded at a record 14.5% yield. CoreWeave sold those bonds in June at 9.625%, so in four months the cost of lending to it without collateral jumped about five points. Venture capitalist Chamath Palihapitiya posted the yield chart as a warning about a private credit bubble around AI.
My Take
I've been saying that the AI bubble lives in the debt more than the demand, and CoreWeave is an example. It raised more than $35 billion this year, carries about $52 billion in debt and leases, and paid $640 million in net interest last quarter, roughly a quarter of its revenue. The $104 billion backlog sounds great, but a backlog doesn’t cover interest until the data centers get built and the customers pay.
Palihapitiya’s numbers show private lenders charge AI borrowers almost the same spread as everyone else, 6.2 points versus 6.1. I think the bond market just repriced that risk for them. My guess is CoreWeave’s next raise costs more, comes backed by chips, or dilutes shareholders, and Nebius and the other AI cloud companies face the same questions. If you own a private credit fund, find out how much AI and software debt it holds, because those loans don’t get repriced every day the way CoreWeave’s bonds do.
Hedgie🤗
A bit overboard but headed that way...bear markets take a long time to gestate....good time for risk management like Credit Rating Securities.
When do the downgrades take over....soon....very soon. #Delphx
NAIC panel readies controversial RBC changes for fall meeting vote insurancenewsnet.com/innarti…
Downgrades occur 10X more than defaults....Credit Rating Securities are the only protection for this. $DELX.NE
DelphX retweeted
Ladies and gentlemen:
The next Lehman Brothers
🔴Oracle’s credit risk is exploding:
Oracle’s 5-year CDS spread has surged to a record ~230 bps, more than 4x the broader investment-grade index at ~55 bps.
The spread has more than QUADRUPLED over the last year and surpassed the Great Financial Crisis levels.
The recent surge comes as Oracle is trying to avoid financial commitments linked to Project Jupiter, a massive data-center project that is facing delays.
Around $18 billion of loans tied to the project are trading at ~90 cents on the dollar, signaling growing stress among investors.
The project is also facing local opposition and delays in government approvals, adding to the uncertainty.
Oracle’s credit risk is rising at an alarming pace.
The Commercial Real Estate Crisis Didn't End — It Moved youtu.be/KkATfxG33Wg?si=fem1… via @YouTube
DelphX retweeted
Are Bonds About To Crash The Stock Market? zerohedge.com/markets/bonds-…
DelphX retweeted
⚠️ Global bond yields are trading at levels NOT SEEN since the Global Financial Crisis:
The Bloomberg Global Treasury Index yield has surged to ~3.9%, its highest level since 2007, as the global bond selloff accelerates.
By comparison, yields fell below 0.5% during the 2020 pandemic, highlighting just how dramatically the global bond market has repriced over the last several years.
The latest surge comes as the Fed delivers another rate hike, while policymakers signal that additional tightening could still be needed as inflation remains well above the 2% target.
At the same time, extremely elevated government bond issuance and growing fiscal concerns are adding further upward pressure on longer-dated yields.
The key risk is that persistently high inflation forces central banks into further tightening, pushing yields even higher from here.
The world has entered a higher-for-longer bond regime, with borrowing costs rising across the global economy.
Global bond yields are back in a pre-2008 world.
DelphX retweeted
Everyone is waiting for US housing prices to crack.
They’re watching the wrong thing. The real crash is in transactions — and it’s creating a very different housing trade.
zerohedge.com/the-market-ear…
Thanks for having me on, once again!!
Bitcoin explodes higher, ETH wakes up, HYPE keeps ripping and crypto options come roaring back to life.
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Insurers take note...many billions in BBBs and no downside protection. Credit Rating Securities way to go. $DELX.NE
DelphX retweeted
🦔AI companies have borrowed so much money this year that they're pushing up interest rates for the entire economy. Nomura estimates tech borrowing alone now equals 25% of what the US Treasury issues in bonds, five times more than last year. Bank of America says the surge has added about 0.3 percentage points to the 10-year yield. Bond managers are selling Treasuries to buy AI corporate debt instead because it pays more.
My Take
AI companies are now competing with the US government for the same pool of lenders, and the lenders are picking the corporate bonds. Alphabet's 30-year pays 6.4%. A Meta data center bond pays over 7.5%. At those rates, a 5.2% Treasury loses the fight for capital every time. That's one of the reasons long-term rates have stayed so stubborn even as the Fed tries to bring them down.
JPMorgan expects $5.5 trillion in AI infrastructure spending through 2030, and most of it will be borrowed. That borrowing raises the cost of money for everyone, the government, your mortgage, small businesses trying to get a loan. The AI buildout has reached the scale where it moves rates for the whole economy, and most people paying higher borrowing costs have no idea that a data center arms race is one of the reasons why.
Hedgie🤗
