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The old playbook for banks is broken. For decades, the conventional wisdom was simple: rising interest rates = good for banks. Higher rates expand net interest margins as loan yields reprice faster than deposit costs, boosting interest income. That story no longer holds—at least not in the way investors expected. Over the past few months, as Treasury yields have spiked (the 10-year recently hitting multi-decade highs near 5.3–5.4%), U.S. bank stocks have lagged badly. The KBW

OpenAI’s $50B reality check just hit the AI market. Yesterday’s reports confirmed what many suspected: OpenAI’s September annualized revenue run-rate is approaching $50 billion—not the ~$70 billion figure that had circulated among investors and media in recent weeks. The gap isn’t a sudden collapse in demand. It’s largely an accounting difference. Anthropic includes full gross revenue from cloud partners (AWS, Google Cloud, etc.). OpenAI reports net. Investors had “grossed up

Take a look at the chart from the census data below. Adjusted for construction inflation, it shows real U.S. construction spending through August 2026. There is a lot of information embedded in this chart. To start, it confirms that the level of concentration in AI is not only happening in market indices, it’s also happening in the real economy. It’s THE bet. That also applies to power, which is needed for data centers. Everything else is contracting, and most of them, if no

Could China's 10-year bond become the new "risk-free" asset? This chart below shows the spread between US 10-year Treasury yields and China's 10-year government bond. For most of 2008-2021, China paid more than the US. Since 2022 it has flipped, and the gap is now roughly 3.5 percentage points in the US's disfavor. Lower borrowing cost is the market's way of saying "we trust this issuer." So is Beijing now borrowing more cheaply than Washington because investors see less risk

There is an historical relationship between credit spreads and the stock market. Yo can see that in the top chart below. Credit markets often notice trouble before equities do. Look at the last three cycles: 📉 2007: spreads bottomed in June, the S&P 500 topped 4 months later 📉 2014-15: spreads bottomed in June '14, the S&P topped 11 months later 📉 2021-22: spreads bottomed in mid-'21, the S&P topped 6 months later. The lead time varies from 4 to 11 months, but the order ha

Total credit is now roughly where it was in September 2006, well below the 2009 peak of 403% and the 2020 spike of 427%. On the surface, that looks like deleveraging in relative basis, as we will discuss below, but in absolute terms, both figures have increased, and remember that we are comparing debt levels with nominal GDP, which includes inflation, particularly the high singles digits we experienced after the pandemic. What’s interesting is not the level, it’s the composit

Please take a look closely at the chart below. What you’re seeing isn’t just “capex.” It’s a dense, circular financing structure: SoftBank → OpenAI → Microsoft/Oracle/Amazon/Google → Nvidia/AMD/CoreWeave/Broadcom → back into capacity commitments, warrants, revenue shares, capacity buy-backs, and vendor financing. Off-balance-sheet commitments alone now sit at roughly $3.8 trillion for the hyperscalers — up ~$700 billion in a single quarter. Add the $250 billion of on-balance-

Something happened with rate hike expectations. One week ago, markets gave an October hike about a 69% chance. This morning, CME FedWatch has it at 24%, and Polymarket shows "No Change" climbing while "25 bps increase" falls off a cliff. A cut is basically priced at zero. Odds for the Oct 28 meeting (CME FedWatch, as of this morning): • Hold at 3.75–4.00%: 75.9% • Hike to 4.00–4.25%: 24.1% What changed since the Sept 16 hike: 1️⃣ The Fed said "no urgency." NY Fed President Wi

Three quarters into 2026, and the Bloomberg US Aggregate Bond Index is down roughly 2.8% YTD. That extends what is already the longest drawdown in the index's 50-year history, now 74 months since the August 2020 peak, with a maximum drawdown of -17.2%. You can see that in the ya le below. For context: the previous record was 16 months (1980-81). We are now more than 4x past that record. Unprecedented doesn't begin to cover it. It does look like we broke the downward trend tha

Yesterday, leaders from Google, Meta, Anthropic, xAI, Nvidia, and OpenAI signed a joint commitment with the White House on frontier model responsibilities. It’s voluntary. It’s short. And it’s structured around four clear layers: 1 Robust internal controls focused on cybersecurity, biosecurity, chemical threats, and preventing unintended system access 2 An empowered internal team to ensure those controls actually work 3 Independent external auditors 4 An independent board

Spain's inflation just hit 4.9% YoY. Don't read it as a Spanish story. Inflation is global, and bond markets are treating it that way. Sovereign yields are rising across developed economies because investors want more compensation for holding duration when price pressure isn't fading. Both inflation and yields are joining the 5% club. Here's why Spain matters. As a eurozone member, it can't set its own rate response. It inherits ECB policy, so when inflation runs hot in a maj

Xi Jinping's state visit to Washington wrapped up Friday with limited deliverables. The pageantry was loud, and the substance was quiet. The Three main takeaways for global markets are: 1. The trade truce was settled before the leaders sat down. The main question, whether to extend the fragile truce from last fall, was resolved before the official meeting. The summit was mostly about optics. 2. The hard issues are still open. The summit showed how little progress there's been

Over the past two to three years, global refining capacity has taken a serious hit, and the effects are rippling through diesel and gasoline markets worldwide. Russia's refining collapse Since March 2024, Ukrainian drone strikes have systematically targeted Russian refineries — Ryazan (nearly 5% of national output), Syzran, Saratov, and others. Ryazan alone has been hit nine times in 2025. The cumulative effect: Russian crude processing has fallen to its lowest level in 21 ye

Six days. That's all that separates the next Fed decision from the midterms. On October 28, the FOMC announces its rate call, six days before Election Day (Nov 3). And if you're wondering whether the Fed would really move that close to an election: it already did this year. On September 16, it hiked 25 bps to 3.75–4.00% — its first increase in three years — with projections pointing to another by year-end. So what happens when the Fed hikes right before midterms? History giv

A month ago, the market was pricing roughly 27% odds of another Fed rate move at the October 28 FOMC. Today, that number sits near 70%, which historically has given the Fed confidence the market will not be surprised by the actions (hike in this case) and will not create chaos. How did we get here: PPI and CPI prints in early September pushed odds toward 50%. The September FOMC meeting itself, where the Fed hiked to a 3.75%-4.00% target, reset the baseline higher. And a strin

Washington wants three things. It can't fully have all three 1️⃣ Help Japan defend the yen, and keep Tokyo from selling Treasuries to do it 2️⃣ Stop long-term rates from rising 3️⃣ Defend the dollar This is the context as of today: the 10-year yield has surged above 5.15%, which is a normal level in historical standards, but it’s the highest since 2007. The Fed just raised rates for the first time in three years. And the U.S. joined Japan in buying yen, its first such move wi

The U.S. Fixed income market isn't just one number. It's a ladder, and not only in terms of maturity, but also in terms of credit quality, liquidity and complexity, and right now each rung is telling a different story: Take q look a the chart below; there is nearly a 5-point spread between cash and private credit — the widest gap tells you how much the market is charging for duration, credit risk, and illiquidity today. Money market yields track short-term policy rates almost

While headlines focus on crude oil, diesel/gasoil is the fuel that actually keeps the world moving: trucks, ships, tractors, generators. And right now, global export flows are trending well below their 5-year range. The two wars (Ukraine and Iran) are causing great damage to the global economy: 1- Russia — historically a top diesel exporter — is weighing a full export ban on top of existing restrictions, after attacks on its refineries and supply networks pushed its domestic

Europe just moved on two fronts of its digital euro strategy, wholesale and retail. This week, at the Eurogroup meeting in Dublin, ECB President Christine Lagarde announced the launch of "Pontes" — a DLT-based settlement tool connecting bank platforms to TARGET services, letting banks settle wholesale transactions in central bank money. It's live essentially immediately. But it's plumbing for banks, not a currency for consumers. The consumer-facing digital euro — the electron

Look at the chart below: 10-year sovereign bond yields across the Eurozone are climbing back toward levels not seen since the 2022 energy shock, and spreads over Bunds are widening again for Italy, Greece, and Portugal. This time, France is the problematic child. This isn't 2020's "whatever it takes" moment, and it's not quite 2022's emergency ECB meeting either. It's something slower and, in some ways, more structural: Energy & geopolitics. The war in Ukraine never fully rec