Yesterday was the worst day in global bond markets in quite some time.
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This puts the UK at the greatest risk of potential contagion & losses if France were to default on their debt or require an IMF & European Central bank loan. When Greece experienced this in 2011 European Banking Crisis, youth unemployment skyrocketed to 60% by 2013. Source: Financelot
Those bonds were issued in June at 9.625%. That’s an increase of nearly 5 percentage points in four months in the yield investors demand to hold its unsecured debt. The figures behind the move: ▪️ More than $35 billion raised this year. ▪️ Around $52 billion in debt and lease obligations. ▪️ $640 million in net interest expense last quarter—roughly a quarter of revenue. ▪️ A $104 billion backlog, with revenue dependent on infrastructure delivery and customer payments. Venture capitalist Chamath Palihapitiya shared the yield chart, warning of a potential private credit bubble linked to AI. According to figures he cited, private lenders charge AI borrowers spreads of 6.2 percentage points, compared with 6.1 points for other borrowers. CoreWeave’s backlog has grown. So has the yield on its debt. Source: Hedgie
September delivered another enormous trade surplus: $133.5 billion, with exports surging 36.3% year-on-year. Expecting Beijing to abandon export-led growth anytime soon looks wishful. China’s economy is increasingly K-shaped: • The upper arm: exporters and advanced manufacturers benefit from global demand for chips, AI infrastructure and green technology. • The lower arm: households face property-related wealth losses, a soft job market and pressure to repay debt. Consumption remains weak as families protect their finances. Factories can thrive even while consumers feel poorer. That leaves Beijing heavily dependent on overseas demand to compensate for weakness at home—and makes a rapid pivot away from exports unlikely. Until Chinese households regain the confidence to spend, the world will keep absorbing the output of China’s factories. Source: Robin Brooks