The Existential Imperative to Borrow Joe Weisenthal and Tracy Alloway よりインセンティブのない借入。Hello and welcome to the newsletter, a grab bag of daily content from the Odd Lots universe. Sometimes it’s us, Joe Weisenthal and Tracy Alloway, bringing you our thoughts on the most recent developments in markets, finance and the economy. And sometimes it’s contributions from our network of expert guests and sources.
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During our conversation, I made an aside about how Big Tech companies and hyperscalers are insulated from higher rates than other businesses. This prompted some pushback online. It seems obvious to me that a company that generates loads of cash is going to be better able to absorb higher borrowing costs compared to other businesses.
While hyperscalers are indeed issuing tons of new debt, they are still throwing off plenty of cash relative to other companies. That said, I also think the key thing to emphasize here is that the collective impulse of hypscalers to borrow is itself rate-insensitive (so far). As Matt King over at Satori Insights puts it: “The issue is less the volume of current borrowing than the desire.”With the AI race couched in existential/winner-takes-all terms (“Whoever has the best model, wins”) there’s basically no upward limit on the hypothetical amount of money these companies need to fund their respective AI buildouts.
A higher cost of capital may force these companies to get more creative in their financing mix, but it doesn’t change the strategic imperative overall. What’s interesting here — getting back to something Joe wrote last week — is that the same is arguably true of many democratically-elected governments. Yields are going up on sovereign bonds, but there are few governments anywhere in the world that look willing to sacrifice their respective popularity in the name of serious fiscal austerity.
With so much of the political agenda now also wrapped in existential terms (“We must spend now on capacity, in order to survive later”) there’s a similar dynamic at play. Put it altogether and what you get is a lot more yield-insensitive issuance from both governments and hyperscalers, who feel they must keep borrowing to survive, crashing into a buyer-base for debt that is actually more sensitive to price. We know that hedge funds have become a bigger part of the buyer base for US Treasuries, for instance. “The problem is less a lack of appetite than a shift away from central banks and liability matchers towards investors with a real choice of what to buy,” says King.
One broad way of looking at the current bond environment is as a place where issuers who feel they have no choice but to borrow are running headfirst into buyers who feel they have a rapidly-expanding array of investment options. Speaking of bonds, isn’t it weird that bonds have become more “stock-like” lately? It’s a question the really sits at the center of lots of market discourse, and it generates a few other questions: What happens if investors can no longer hedge stocks with government debt? And what explains the global selloff in bonds if bonds are now “riskier”? Today’s guest, Carolin Pflueger, associate professor at the University of Chicago and a resident scholar at the Chicago Fed, talks to us about how the Fed’s “reaction function” and the institution’s credibility might play a role in making bonds more “bond-like” again. Watch: Bloomberg / You Tube Listen: Apple / Spotify Enjoying Odd Lots? Check out these newsletters: You have exclusive access to other subscriber-only newsletters.
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出典: Bloomberg Markets · 要約：HeadlinesBriefing