Market Insights

“Bonds of US technology firms are trading at their weakest in more than two decades relative to the broader corporate debt market, after companies… flooded investors with hundreds of billion of borrowings to fund artificial intelligence investments. The average risk premium, or spread, on investment-grade technology bonds stood at about 1.02 percentage points as of Thursday’s close, about 0.15 percentage point higher than the average spread for the market at large. That’s near the widest gap between the two since the aftermath of the internet bust in the early 2000s.” Bloomberg’s Zahra Tayeb, October 30, 2026

“Financial firms, companies and governments have raised a combined of around $6.61 trillion through broadly syndicated investment-grade and junk-bond sales so far this year, up 15% from the same period a year earlier and eclipsing 2025’s record with two months still to go.” Bloomberg’s Gerson Freitas Jr. and Ronan Martin, October 29, 2026

“When you have such a large quantum of [AI] debt coming, at some point the challenge could be less about finding an investment-grade backstop, and more about finding the actual buyers willing to absorb more of the risk coming from the same handful of investment-grade backstop providers.” Citadel analyst Tucker Roberts, October 28, 2026 (Bloomberg)

“The credit market is getting jammed right now because it hasn’t figured out a good way to offload those risks yet. AI’s rising tide will sink some boats, and it’s a wavy tide. Credit is not done resetting. It’s going to be very tested.” Citadel co-CIO Pablo Salame, October 26, 2026 (Bloomberg)

“Global hedge funds suffered one of their broadest declines since the Covid pandemic following the stock market selloff on Thursday, according to Goldman Sachs Group Inc.’s prime brokerage desk. ‘For the first time since Covid, all three broad equity strategies fell more than 1% on the same day,’ the firm said…” Bloomberg’s David Ramli, October 23, 2026

Noland: Today’s session had some hallmarks of intensifying deleveraging (i.e., hedge funds). Treasury yields sank 15 bps. Such a move is indicative of aggressive unwind of “carry trades” and other leveraged positions (corporates, MBS, EM…) financed by short positions in Treasuries. This dynamic tends to be self-reinforcing. A powerful de-risking/deleveraging is also unfolding in the big technology stocks – where I believe enormous leverage has accumulated. The Semiconductor Index and MAG7 index are down 6.7% and 3.4%. High yield CDS surged 9 bps today to a six-month high 360. CoreWeave closed down 10%, Meta 7%, Intel 8%, Amazon 4.6%, and Nvidia 4.4%. Tech, financial and emerging market CDS are all notably higher. Deleveraging has become global. French/German 10-year spread widened 13 bps today to the widest level (178bps) since the 2011 European debt crisis. The yen popped 0.8%, pressuring yen “carry trades.” Bitcoin down 4% is also indicative of deleveraging. Metals under intense pressure, with silver sinking 5.9%.

“Consultants at Bain & Co. predicted in late September that the likely revenue available from AI spending by consumers and companies by 2031 would be less than $2 trillion, which is far below the $6 trillion needed to justify planned investments. Last week, Gartner Inc. upped the ante when the tech research firm estimated that data center owners would face a revenue shortfall of $6 trillion by 2032 compared with infrastructure spending — and that nearly $4 trillion risks getting written off as excess to the world’s AI needs.” Bloomberg’s Paul J. Davies, October 19, 2026

“Corporate America has been very uneven in its ability to extract value from its AI models. I think all of Corporate America is looking at their bills from Anthropic and OpenAI and going, ‘Okay, we need to think about how to make sure we’re getting productivity out of this.’” Ken Griffin, October 11, 2026 (Bloomberg)

Noland: Not an impressive session today (10/19). CoreWeave closes slightly lower after Goldman upgrade, with bonds barely rallying after last week’s bloodbath. Oracle yields up another 25 bps to 8%. Not pretty. CDS higher almost across the board. Bank Index down 1%, Broker/Dealers 1.7% (down 4.5% in 5 sessions). Leveraged loan prices down another 7 cents to a 6-month low. WTI up $2.25 to $103.66. French "oat" yields up 13 bps to 4.93%.

‘We believe we are in a new macro regime… The more leveraged you are, the more higher rates will likely hurt you.” Atsi Sheth, Moody’s global credit views, October 16, 2026 (Wall Street Journal)

“CoreWeave Inc.’s credit risk climbed to an all-time high Thursday as its high-yield bonds extended declines, rattled by the AI cloud-computing company’s plans to ramp up borrowing. The cost of protecting CoreWeave’s debt against default for five years rose by as much as 74.5 bps to 1194.5 bps… That’s the highest intraday level on record with swaps pricing in a more than 60% chance of default within the next five years.” Bloomberg’s Caleb Mutua, October 15, 2026

“This is starting to feel like aggregate overheating, that the AI data center cost increases are jumping out of its lane, that prices are going up in spaces that are not just components in data centers and the directly adjacent industries to data centers. If you start to see more of this spreading into general services, that investment goods are just getting GDP growth up faster than potential and generating this kind ⁠of spillover inflation, that’s problematic because unlike supply shocks where we tend to assume they’re going to go away on their own in a relatively short period ⁠of time, nobody thinks that of overheating demand.” Chicago Fed President Austan Goolsbee, October 13, 2026 (Semafor)

"I think the concern that probably should be top of mind is less about some major faltering and demand, but supply chain risks and access to what is needed to continue this [AI] build-out. I think that is something that is less discussed, not to mention the fact that AI, even if long term it's disinflationary, it is inflationary in the here and now." Charles Schwab chief investment strategist Liz Ann Sonders, October 13, 2026 (Yahoo Finance)

“Hedge funds have become increasingly important participants in global financial markets. Although hedge funds account for only about 5% of nonbank financial intermediation, their assets have grown substantially faster than those of most other nonbank financial segments since the global financial crisis. By early 2026, gross assets of hedge funds reached about $13 trillion, compared with $4 trillion in 2013. In addition, hedge funds now play a more prominent role in trading, liquidity provision, and risk transfer across core financial markets, increasing their relevance to transmitting macrofinancial shocks to the financial system. The growth of hedge funds has been financed primarily through leverage… The sector’s gross notional exposure, including off-balance-sheet derivative positions, has tripled from $13 TN in 2013 to more than $40 TN in early 2026.” International Monetary Fund Global Financial Stability Report, October 2026

“One concern is the growing concentration of exposure to a relatively small group of companies and ultimately the same underlying AI investment cycle, even as that risk gets distributed across different issuers, sectors, and financing structures. That creates the potential for correlated risks that may not be fully reflected in current valuations.” Steven Kohlenstein, fixed-income portfolio manager at T. Rowe Price, October 8, 2026 (Bloomberg)

“Every new financing announcement feels like another entrant in an auction for investor balance sheet, and that’s creating a level of spread volatility that would have seemed hard to imagine a year ago. Some days it feels like the market is holding an emergency meeting every few hours to reprice the size of the AI buildout.” Mark Clegg, senior fixed-income trader at Allspring Global Investments, October 8, 2026 (Bloomberg)

“Some of these very big AI companies have enormous commitments, and then there are a lot of suppliers, and a lot of suppliers have borrowed against those commitments… What happens if they can’t fulfill those commitments or all those borrowed against them? It's called circularity risk.” Former Treasury Secretary Robert Rubin, October 7, 2026 (Bloomberg)

“Considering that a single gigawatt of computing capacity can cost tens of billions of dollars, money managers need to pay attention to the financial consequences of these gargantuan projects falling behind schedule, or never coming online at all. That could mean a hit to developers and would-be tenants, of course, but also to semiconductor shipments.” Bloomberg’s Chris Bryant, October 8, 2026

“Persistently higher rates would boost interest expense as a share of GDP — a key gauge of the cash outflows needed to service the debt — and push the debt-to-GDP ratio up to 132% by 2035, 10 percentage points above our baseline, raising the odds that deficit reduction becomes necessary sooner to stabilize the debt.” Goldman Sachs strategist Pierfrancesco Mei, Yahoo Finance, October 6, 2026

“Signs of stress are mounting across French financial markets, from widening sovereign and CDS spreads to deteriorating liquidity. With the global bond selloff putting France increasingly in the spotlight, the country has little room for fiscal missteps as budget discussions begin.” Bloomberg economists Jean Dalbard and Simona Delle Chiaie, October 2, 2016