This week's interesting finds

 

A few charts worth discussing

"Forecasted copper production growth remains in the 1%-to-2% range despite many of today’s big themes (e.g., energy transition and data centres) requiring substantial amounts of the base metal. Electricity demand in the U.S. is also starting to grow after being flat for 20 years.”

- Sydney Van Vierzen

Other charts worth pointing out

Historical property & casualty insurance – combined ratios vs. investment yields

Market breadth and drawdown depth 

Long-term U.S. Treasury performance

Newspaper stocks vs. forward earnings

Software sector performance by category

AI supply chain & semiconductor/storage performance vs. major indices

Asset-heavy vs. asset-light equity performance

Global defense spending as share of GDP

Defense industry orders and shipments

Global infrastructure investment requirements by region

Semiconductors vs. hyperscalers – free cash flow 

Data centre-related construction employment

S&P 500 Index earnings growth by sector

Global credit market starts to sputter as jumbo deals drag

Spreads on global corporate bonds have blown out about five basis points this week, the most since March. That leaves them at their widest in half a year, according to a Bloomberg index. Trading at the start of the global day in Asia on Friday pointed toward more selling, with yield premiums on investment-grade notes increasing 2 to 4 basis points, traders said.

The weakness in credit contrasts with gains in Treasuries after mostly dovish comments from United States Federal Reserve officials. The divergence stands out. Credit has held up well in the past year even when sovereign debt was slumping, prompting many investors to take the view that some companies are safer bets than even the most powerful governments. But record bond sales recently from Paramount Skydance Corp. to SoftBank Group Corp. have added to a surge in supply of corporate debt that’s now giving money managers pause.

While credit markets remain at historically stronger levels despite the stumbles in recent weeks, a number of signals are showing growing investor caution.

After Paramount Skydance Corp. issued US$52 billion of debt this week to fund the biggest Hollywood buyout ever, its junk notes were among the hardest hit in initial trading. That came just days after SoftBank pushed through a US$11.1 billion junk debt deal for which it had to pay record yields, including 9.75 per cent on a 7.5-year bond, in an effort to fund its massive AI ambitions.

Elsewhere in the riskier parts of the U.S. debt market, spreads jumped above 1,000 basis points over Treasuries for the first time since the regional banking crisis in 2023. That follows a steady rise since April as investors began to anticipate the Fed’s next rate hike.

Still, not all investors see a rate move as an indication of underlying stress.

This week’s fun finds

368 farmers gave up part of their land so elephants could cross the valley safely. Trail cameras show 529 already have

African savanna elephants in southern Tanzania have an unusual habit: They climb mountains. Up to 1,000 of the pachyderms spend part of their time in the Udzungwa Mountains, clambering up and down steep slopes that are clad in lush, closed-canopy rainforest.

But some also migrate from the mountains to more typical savanna elephant (Loxodonta africana) habitat that lies to the east, across the Kilombero Valley, in Nyerere National Park.

Fifty years ago, this land was connected by unbroken lowland rainforest, but since then, the forest has been cut down and the valley converted to farmland. This created conflict between elephants and farmers when the pachyderms crossed the valley along their long-established migration routes.

The answer? Give some of the land back to the elephants. The process took seven years, but in April 2025, after seemingly endless preparatory work by STEP and its partners, and hundreds of meetings with officials and residents, the Tanzanian government designated the Nyerere-Udzungwa Wildlife Corridor (NUWC), the country’s the first wildlife corridor to be given official protection. It’s designed to keep elephants out of people’s crop fields.

This week's interesting finds

Things we wish we’d known when we were younger

Summer’s officially over and school’s back. For the kids in our lives, we've put together a new video highlighting some of the financial advice we wished we'd learned earlier.

A few charts worth discussing

“Nearly 45% of S&P 500 businesses have moved in the opposite direction of the market over the past three months, even as the Index trades near an all-time high today. This degree of dispersion hasn’t been seen in at least 36 years and could reward investors willing to look where the crowd isn’t.”

- Tye Bousada

Other charts worth pointing out

Market breadth is very narrow

S&P 500 contributors since ChatGPT’s release by company

AI-related performance by segment

Meta vs. travel platforms

Major copper discoveries, 1992–2025

U.S. treasury yields by maturity

U.S. high yield CCC yield-to-worst since 2000

Oil price performance following geopolitical conflicts

China crude oil import volumes

Historical U.S. energy consumption by source

U.S. treasury yields vs. S&P 500 earnings yield

Consumer activity in hobby-related categories

Big Tech uses guarantees to keep $300bn of AI exposure off balance sheets

Big Tech companies are rapidly expanding their use of guarantees to back debt for AI data centres and chips, issuing up to $300bn in commitments in less than a year while recording little of that exposure on their balance sheets.

First used by Meta on a huge data centre project last autumn, so-called residual value guarantees have been taken up by Broadcom as part of its chip financing deal for Anthropic and by Nvidia to offer support to OpenAI and other customers buying its chips.

These arrangements, under which tech companies guarantee a minimum future value for chips or data centres, join a growing set of creative financing structures embraced by Big Tech to accelerate the AI infrastructure boom. According to an FT analysis, tech giants have offered up to $300bn in these guarantees in the past 12 months alone.

Bankers describe the guarantees as “balance-sheet efficient”. They typically backstop debt that is issued not by the tech companies themselves but by special-purpose vehicles that own the infrastructure, allowing the tech groups to lend their financial strength to the deals without needing to fully book the liabilities.

The rise of guarantees adds a layer of exposure if Big Tech’s multitrillion-dollar bet on AI does not pay off because of disappointing usage, an oversupply of computing power or the failure to build sustainable business models around the technology.

As their AI spending plans begin to outrun their cash flows, tech companies have become more focused on managing their balance sheets in order to keep their investment-grade credit ratings and maintain access to the deepest pools of low-cost corporate debt.

Overall, Morgan Stanley analysts have tallied more than $3.1tn in off-balance-sheet commitments and credit support by seven hyperscalers and chipmakers.

For lenders, the residual value guarantees from Big Tech help to alleviate concerns about current technology quickly becoming obsolete as they put up tens of billions to finance AI data centres and chips. The tech companies agree to cover specified shortfalls if these assets one day have to be sold or re-let and fetch less than a guaranteed minimum value.

Their introduction to AI financing has unlocked cheaper financing for projects with these guarantees, which typically price at just a 100 to 150 basis-point premium to the guarantor’s own debt, according to people familiar with the matter.

Broadcom’s recent quarterly filing showed the credit support had little impact on its own balance sheet. People familiar with the matter said the chipmaker would probably offer guarantees to help finance some of its planned chip deliveries next year, which included another 5GW of chips for Anthropic as well as 1.3GW of custom chips for OpenAI.

The company told investors that “the strong profitability trajectory of the leading frontier AI labs and the sustaining value of the underlying assets” meant there was a low probability of triggering such guarantees.

Last month Broadcom’s rival Nvidia unveiled a similar vendor financing programme. The chipmaker said it could offer residual value support of up to 25 per cent on deals being put together by Goldman Sachs and a group of Wall Street investors aiming to collectively muster $500bn of capital for Nvidia-powered AI infrastructure.

Meta was the first tech group to embrace the structure for AI financing, providing a $28bn residual value guarantee to support its joint venture with Blue Owl developing the 2GW Hyperion data centre in Louisiana. The project stretches across 4mn square feet and is expected to come online by 2030, drawing enough power to supply about 1.5mn homes.

The guarantees ultimately helped raise $27bn of debt for the data centre within 150bp of Meta’s own bonds, with little exposure recorded on Meta’s books. The tech group used a similar structure in July to support a 1GW data centre being built in El Paso.

While the guarantees are mostly off-balance-sheet, credit rating agencies say they do make adjustments to tech groups’ leverage figures to reflect them.

This week’s fun finds

Bold flavours, great conversation and a chance to connect. Thanks to Max from the Relationship Management Team for bringing everyone together this week!

At 100, Britain’s Oldest Dancer Leads Flash Mob to Classic ’60s Tune

At age 100, twinkle-toed Bernard Gilbert put a huge crowd through their paces — and proved he’s still got the moves — when he led a flash mob dance in the middle of a busy city center in Worcester, England.

A video making the rounds on social media shows Gilbert, believed to be Britain’s oldest dancer, performing kicks and flicks in time to Roger Miller’s 1965 hit “King of the Road.” And he showed no signs of slowing down as more than 200 people joined him for the flash mob on Sept. 19, which was part of a charity fundraiser for Alzheimer’s disease. “It was a wonderful event and the crowd did well to keep up with me,” he told SWNS.

This week's interesting finds

 

A few charts worth discussing

“Change in grocery spending six months after GLP-1 adoption. Notably, spending on coffee, tea and energy drinks declined 4%, while water declined 2.5%. This suggests there’s also a broader traffic and industry effect at play.”

“The death of consumer-packaged goods brands is well understood.”

“Unlike the restaurant industry, where large chains are taking share, smaller independent brands are gaining share in grocery.”

“Food away from home continues to take share, providing a tailwind for restaurant spending that likely outweighs the impact of GLP-1 adoption, with convenience and delivery continuing to drive share gains.”

“Multiples have followed the decline in revenue growth across the consumer-packaged goods sector, falling as growth has slowed.”

- Jason Liu

Other charts worth pointing out

U.S. household card spending by category

Spread-to-worst by credit rating

Historical S&P 500 Index earnings per share

S&P 500 Index earnings growth vs. U.S. economic growth

S&P 500 Index diverging valuations

Contribution to S&P 500 Index earnings per share growth

Reported vs. fully expensed capex impact on earnings per share

Correlation between technology and non-technology stocks

S&P 500 Index vs. Treasury Index 2-year rolling correlation vs. U.S. 10-year Treasury yield

US regulator opens markets to tokenised stock trading

The US Securities and Exchange Commission has greenlit trading in tokenised stocks in a move that is expected to push crypto companies more firmly into traditional equity markets.

Tokenised stocks are blockchain-based representations of traditional equities. Proponents say they enable holders to trade them round-the-clock, more cheaply than traditional stocks and more easily used as collateral.

The SEC’s long-awaited order comes as the proliferation of stock tokens has come under fire, particularly from companies that object to tokenised versions of their traditionally issued stocks.

Retail brokerage Robinhood offers tokenised stocks outside the US, but has faced criticism for offering tokens tied to the stocks without the approval of the issuers.

Under the SEC’s so-called innovation exemption, companies such as Robinhood which offer tokenised stocks in the US must “provide written notice and an opportunity to object” to the company whose stock they want to tokenise.

The blockchain-based tokens must also give investors “the same rights and privileges” as traditional stocks, such as voting rights, and trading in them must stop at the same time as any stoppage on a traditional venue.

Issuers including Robinhood and Kraken owner Payward will have to change the models they currently offer to investors outside the US in order to meet the SEC’s requirements, as they currently do not ask issuers for permission to list their shares and users do not have direct voting rights.

The tokens instead essentially act as derivatives that track a company’s share price. The firms can still continue to offer the derivative model to investors outside of the US.

The SEC’s innovation exemption comes as the agency’s role in setting rules for the crypto industry is expected to grow in lieu of US laws. A landmark US crypto bill, known as the Clarity Act, failed to advance in the Senate this week, as Democrats insisted on stronger limits on Donald Trump’s ability to profit from the digital assets industry.

The order gives venues that want to offer tokenised stock trading a five-year exemption from many rules that apply to platforms such as Nasdaq and the New York Stock Exchange, as the regulator tries to boost digital markets.

Crypto companies are fiercely trying to compete with longstanding exchanges and brokerages by giving customers access to tokenised stocks. They largely believe that stocks, bonds, commodities and other assets will all eventually be traded on the blockchain 24/7.

Some crypto firms have argued against Robinhood’s derivative model and believe corporate issuers must be involved in the process.

Before the SEC’s latest rule, few companies had undertaken direct issuance. Blockchain technology company Figure Technology Solutions issued its own equity on to the blockchain in February. 

Tokenisation firm Ondo Finance’s Matthieu de Vergnes argues that derivatives tied to equities already exist, such as equity-linked notes or American depositary receipts, which offer US investors exposure to foreign stocks.

This week’s fun finds

Unsealed for the First Time in 600 Years, This Tomb in Peru Was Just Declared the ‘Discovery of the Decade’

Some 600 years ago, members of the pre-Inca Chimú civilization buried more than three dozen people in a mausoleum near modern-day Trujillo, Peru. The dead were interred alongside a rich array of grave goods, including metal weapons, copper and gold artifacts, ornate jewelry, and colorful textiles—suggesting that they were high-status individuals, perhaps even royalty.

The mausoleum remained largely intact until this year, when excavations uncovered its entrance beneath layers of sand, soil and stone at Chan Chan, a UNESCO World Heritage Site that was once the Chimú capital. The tomb dates to during or just before the Inca conquest of the region in the mid-15th century, making its survival, untouched by colonial and contemporary looters alike, even more impressive.

As lead archaeologist Jorge Meneses tells BBC News, the find marks “the first time that Peruvian archaeologists have been able to come across an almost intact [funerary] platform, with unaltered contents, a platform that was designed for an elite individual, whose main chamber has remained sealed for almost 600 years.”

This week's interesting finds

 

A few charts worth discussing

“The volume of loans trading below $60 is approaching all-time highs.”

- Derek Skomorowski

“It's important to be aware of these correlations when thinking about portfolio construction. Non-obvious correlations can lead to unintended overexposure to one idea. AI capital spending extends well beyond computing, flowing into the networking, power, cooling and physical infrastructure required to build and operate AI data centres.”

- Tye Bousada

“New Whoppers, higher quality…take a look inside Burger King’s big revamp.” (Video)

- Greg Sinclair

Other charts worth pointing out

Historical multifamily delinquency rate

Long-term U.S. bond returns since 1793

Global government bond yields – YTD

S&P 500 Utilities Index dividends vs. 10-year treasury yield

U.S. corporations vs. government – net interest payments

Aggregate business development company (BDC) fund flows

Russell 2000 vs. S&P 500 – Cumulative relative performance since 1990

Percentage of unprofitable small-cap and biotech companies

Small caps vs. S&P 500 Index – performance over the last 12 months

Small-cap performance over the last 12 months by industry

Trailing 12-month return contributions by market

Trailing 12-month return contribution by sector and style

12-month forward P/E ratios by MSCI regions

12-month forward P/E ratios by MSCI World sectors and styles

Anthropic and OpenAI bankers push for top-tier credit ratings post-IPO

Anthropic and OpenAI’s bankers are lobbying for an investment-grade credit rating after their upcoming initial public offerings, a designation that would lower the borrowing costs for their ambitious AI infrastructure plans.

Morgan Stanley and Goldman Sachs have held talks with credit rating agencies in recent weeks on behalf of the two leading AI labs, as they look to gain access to the $11.7tn corporate bond market post-IPO, said people familiar with the matter.

Analysts at the rating agencies told the FT that bankers acting for Anthropic and OpenAI had argued that the two companies’ public listings would unlock vast amounts of liquidity and improve the health of their balance sheets.

Achieving an investment-grade rating from Fitch, Moody’s and S&P soon after going public would be a remarkable feat for the two lossmaking AI labs, unlocking big benefits for the companies and their infrastructure partners including Oracle and Nvidia.

The rating would open the door to pension funds, insurers and other institutional investors that take far more limited positions in riskier speculative-grade debt.

It would provide another example of Wall Street changing longstanding practices to usher in the three largest IPOs in history. SpaceX, which went public in June, was the first large tech company to receive an immediate investment-grade rating.

Elon Musk’s rocket conglomerate also benefited from changes to index rules that meant billions of dollars in passive investment tracking the Nasdaq immediately flowed into its stock.

Previous tech heavyweights such as Meta, Netflix and Tesla waited a decade or more after their listings to get a top-tier credit rating.

Anthropic and OpenAI have recently arranged substantial credit lines with big banks but have mainly relied on institutional and venture capital investors to finance their hundreds of billions of dollars in spending on specialist chips and data centres to train and run their models.

Both labs have also leaned on the investment-grade rating of partners to secure preferential borrowing terms for debt tied to their infrastructure projects.

However, concern over the mounting debt load tied to AI projects has pushed up borrowing costs in recent months. An investment-grade rating would give the companies access to a broader pool of capital and obtain better borrowing terms.

Analysts at rating agencies are waiting to see the results of their IPOs before reaching a decision. The two companies remain unprofitable and have shown little sign of generating positive free cash flow. They also face growing risks, including the popularity of Chinese open-weight models.

The credit ratings of OpenAI and Anthropic are important to their Big Tech partners, which have taken on hundreds of billions of dollars in guarantees on the assumption that both labs will soon be able to borrow on their own.

A ratings bump could also help Oracle refinance some of its current debt pile after raising funds to fulfil a $300bn data centre build-out for OpenAI that has put it at risk of losing its investment-grade status following a recent downgrade.

Anthropic is expected to unveil its IPO prospectus soon, allowing investors to pore over its finances ahead of a listing that could value the five-year-old company at $2tn or more. OpenAI is expected to follow suit with an IPO next year.

Analysts said opaque finances and the start-ups’ use of flattering annual recurring revenue figures have masked their actual performance.

SpaceX issued $25bn in bonds days after it went public and received its investment-grade credit rating from all three rating agencies in June. S&P at the time said the rating reflected the “solid foundation” that the rocket maker had built through its launch business and Starlink satellites.

However, SpaceX’s bonds sold off shortly after being issued, which could also serve as a cautionary tale for credit investors.

This week’s fun finds

Nikki, from the Institutional Team, was able to spice things up in the office by hosting a build-your-own-taco moai. The team enjoyed building their own creations all while being able to reconnect after the long weekend.

Real-Life “Paw Patrol”: In a First for Britain, 3 Adorable Dogs Are Working Security at Major Train Station

London’s Waterloo station has become the first major train station in Britain to put dogs on regular security patrols, employing canine colleagues Riley, Buster, and Flo as part of a three-month trial to offer passengers increased safety assurance.

Like a real-world version of the animated kids’ show Paw Patrol, the pups were deployed by South Western Railway and Network Rail Wessex in partnership with canine security company Alpha Canine Specialists. And although we know they have very serious jobs, it’s hard not to break out in a grin when looking at their happy faces.